Federal Reserve government bonds and the amount of bank reserves are bought on the open market.
What will happen if bonds are bought on the open market by the Federal Reserve bank?
The price of bonds increases when the Federal Reserve purchases them, which lowers interest rates. Open market transactions expand the money supply, which decreases the value of money and lowers the money market interest rate.
When does the Federal Reserve make open market purchases of treasury bonds?
The money supply will expand as a result of the Fed's open market bond purchases. The amount of money in circulation will drop if it sells bonds on the open market.
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