Assume that the desired reserve ratio is 20 percent.Suppose that the Bank of Canada sells $500 of government securities to chartered banks and buys $500 of securities from individuals, who deposit the cash in chequing accounts.Refer to the above information.As a result of these transactions, the supply of money in the economy will:

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Selling government securities to chartered banks decreases their reserves, but buying securities from individuals and accepting deposits in return increases reserves. Since the total amount of reserves in the economy remains the same, the money supply will also remain unchanged.

Assume That the Desired Reserve Ratio Is 20 Percent