When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Name: When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:
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When the Fed buys government bonds in the open market, there is new currency in the hands of the banking community, which increases bank reserves. These reserves will be lent out, which increases the money supply by more than $1,000,000 because of the money multiplier.

When the Central Bank Buys $1,000,000 Worth of Government Bonds