If the Fed buys bonds in the open market, the money supply decreases.

Open Market

A marketplace where buyers and sellers engage in trade of goods, services, and financial instruments freely and openly.

Identify the instruments and methods the Federal Reserve employs to affect the money supply and banking activities.
Comprehend the effects of modifications in the money supply on economic dynamics.

Verified Answer

Final Answer :

False

Explanation :

When the Fed buys bonds in the open market, it increases the reserves of banks, which can then lend more, effectively increasing the money supply.

Learning Objectives

Identify the instruments and methods the Federal Reserve employs to affect the money supply and banking activities.
Comprehend the effects of modifications in the money supply on economic dynamics.