The Federal Reserve'S Primary Tool For Changing The Money Supply Is The

(Correct Answer Below)

The Federal Reserve'S Primary Tool For Changing The Money Supply Is The

____ In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will ___ government bonds.
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open market operation , buy Open market operations are the Fed's primary tool for controlling the money supply. Open market operations involve buying and selling U.S. government bonds. To increase the money supply, the Fed creates dollars with which to purchase government bonds from the public. After the purchase, the Fed has bonds and the public has new dollarsÑan increase in the money supply. To reduce the money supply, the Fed sells U.S. government bonds to the public. After the sale, the public has bonds and the Fed has taken dollars out of circulation, thereby reducing the money supply.
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