An attempt by a central bank to alter the money supply by buying or selling domestic assets

Question

Quizplus · Accepted Answer

When a central bank buys or sells domestic assets, it directly affects the domestic money supply. If it buys assets, it increases the money supply; if it sells, it decreases the money supply. This action can lead to an offsetting change in foreign reserves as the central bank may engage in foreign exchange operations to maintain exchange rate stability, but the domestic money supply itself is directly impacted by the central bank's actions.

An Attempt by a Central Bank to Alter the Money