Question

Suppose the fed sells​ $100 of government securities. if the desired reserve ratio is 20 percent and there is no currency​ drain, then the quantity of money

Answer 1

The reserve ratio is the part of a depositor ’s balances that banks must have on hand as cash.

This is a requirement determined by Federal Reserve and this affects the money supply in a country at any given time.

If the desired reserve ratio is 20%, and the FED sold $100 of government and there is no currency drain, then the quantity or supply of money will decrease.