There are three basic ways that the Fed can affect the money suppl1

There are three basic ways that the Fed can affect the money suppl1

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There are three basic ways that the Fed can affect the money supply. The first is  through open market operations. The second is by changing the reserve requirement.  The third is through changing the federal funds interest rate. Each of these actions in  some way affects the total amount of currency or deposits available to the public.  Open market operations are the sale and purchase of government bonds issued and  regulated by the Fed. When the Fed sells government bonds, the public exchanges  currency for bonds, resulting in a shrinking of the money supply. When the Fed  purchases government bonds, the Fed exchanges currency for bonds, thus resulting in  an increase in the money supply. Open market operations are the most common tool  that the Fed uses to affect the money supply. In fact, almost every weekday government  bonds are bought and sold in New York City. 
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