When the Federal Reserve sells $500 worth of government securities, the money supply

Name: When the Federal Reserve sells $500 worth of government securities, the money supply
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Question

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When the Federal Reserve sells government securities, it reduces the reserves of banks, leading to a decrease in the money supply. The money supply falls by more than $500 due to the money multiplier effect, where the initial reduction in reserves leads to a larger overall decrease in the money supply.

When the Federal Reserve Sells $500 Worth of Government Securities