When the federal reserve conducts open-market operations to increase the money supply, it buys or sells government bonds. The money supply increases when buys bonds and decreases when sells bonds.
An open market operation is an example of monetary policy. Monetary policy are the policies undertaken by a country's central bank in order to affect the level of aggregate demand in the economy.
An open market operation is the sale or purchase of government bonds. When the Fed sells bonds, its is known as an expansionary monetary policy because it increases the supply of money in the economy. On the other hand, when the Fed buys bonds, it is known as a contractionary monetary policy because it decreases the supply of money in the economy.
To learn more, please check: https://brainly.com/question/6590619
