When the federal reserve sells u.s. government securities on the open market, this tends to lower banks' reserves and lower the money supply.
A permanent open market operation (POMO) refers to the Fed's (or central bank's) constant use of the open market to buy and sell securities to adjust the money supply. POMO is one of the tools used by the Federal Reserve to conduct monetary policy and influence the American economy.
The Federal Reserve uses open market operations to buy and sell securities to banks. When the Federal Reserve buys securities, it allows banks to hold more money in reserves on their balance sheets. When the Federal Reserve sells securities, it takes money from banks and reduces the money supply.
Beginning in 2007, the Fed began issuing additional lines of credit to help stabilize the financial system. The Federal Reserve creates new reserves and money when it buys bonds. It destroys reserves, thereby reducing the money supply when selling bonds.
Learn more about the federal reserve here https://brainly.com/question/25843620
#SPJ4
