If the Fed sells $50 in securities and the reserve requirement is 25%, according to the simple formula for the money multiplier, the money supply

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When the Fed sells securities, it decreases the reserves of the banking system, leading to a decrease in the money supply. The money multiplier is 1 divided by the reserve requirement. With a 25% reserve requirement, the multiplier is 1 / 0.25 = 4. Therefore, a $50 decrease in reserves leads to a 4 * $50 = $200 decrease in the money supply.

If the Fed Sells $50 in Securities and the Reserve