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    How the Fed Changes Money Supply

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    Explain how the fed changes the money supply with an open market purchase of Treasury securities. (Be careful M1 = currency + checking deposits)

    I do not understand how the Fed changes money supply in relation to the currency portion of M1. Please assist and provide weblinks for additional references. Thks

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    https://brainmass.com/economics/monetary-policy/fed-changes-money-supply-32915

    Solution Preview

    Open market operations is a major monetary policy adopted by the Fed to change the money supply The buying and selling of U.S. government securities in the open market to influence the level of reserves in the system, which effects the amount of money and credit in the economy.
    During an economic boom, the Contractionary monetary policy will be adopted to decrease ...

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