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How does the Fed change the money supply with an open market purchase of the treasury securities. If it purchases $ 1Million, how much does the money supply increase?

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How does the Fed change the money supply with an open market purchase of the treasury securities. If it purchases $ 1Million, how much does the money supply increase?

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When the open market operation (OMO) purchase is made, the FED will credit that dealer's reserve deposits with the sale price of the bond (let's say $1 million). The FED will receive the IOU (i.e., bond certificate) in exchange. The money used by the FED to ...

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Sandeep Bardia, MBA
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  • MBA, Rochester Institute of Technology
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