In order to contract the money supply in the economy, the Federal Reserve should sell bonds worth $12 million.
The Fed should sell bonds because people would pay for these bonds to the Fed which would then take the amounts paid out of circulation.
The amount that should be sold is:
= Amount to be contracted x Money multiplier
= Amount x (1 / reserve requirement)
= 75 x 1 / 16%
= $12 million
Full question is:
Assume that the reserve requirement is 16 percent. Also assume that banks do not hold excess reserves and there is no cash held by the public. The Federal Reserve decides that it wants to contract the money supply by $75 million using open-market operations.
In order to accomplish its goal, the Fed needs to buy/sell ?? million worth of bonds.
Find out more on the reserve requirement at https://brainly.com/question/10684321.
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