. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds in the open market. Describe the process through which this action will impact the level of reserves in the banking system.

Suppose the economy is initially experiencing an inflationary gap. In order to maintain price stability the Federal Reserve has decided to engage in monetaryrestraint. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds in the open market. Describe the process through which this action will
impact the level of reserves in the banking system.

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