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Business, 21.02.2020 03:57 maria051002camp

Answer the question on the assumption that the legal reserve ratio is 20 percent. Suppose that the Fed sells $500 of government securities to commercial banks (paid for out of commercial bank reserves) and buys $500 of securities from individuals, who deposit the cash in checking accounts. As a result of the given transactions, the supply of money in the economy will: a) rise by $500. b) remain unchanged. c) fall by $500 d) fall by $100.

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