Suppose the economy of a country is experiencing inflation, and the Central Bank wants to decrease the money supply to control inflation. The current money supply is $4 trillion, and the required reserve ratio is 10%. The Central Bank decides to sell government securities worth $500 billion to reduce the money supply. Calculate the change in the money supply after the sale of government securities, assuming that the currency-to-deposit ratio is 0.2 and banks do not hold excess reserves. Show all your calculations.

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The detailed answer for the above question is provided below Given information Current money supply 4 trillion Required reserve ratio RRR 10 Sale of g... View the full answer