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

Name: When the central bank sells $1,000,000 worth of government bonds to the public, the money supply:
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When the Fed sells government bonds in the open market, there is less currency in the hands of the banking community, as some money must be used buy these bonds. As a consequence the amount of bank reserves decreases. This contraction of reserves decreases the money supply by more than $1,000,000.

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