When the Fed purchases federal government bonds in the open market

Name: When the Fed purchases federal government bonds in the open market
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Question

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When the Fed purchases federal government bonds in the open market, it increases the amount of money in circulation, thereby expanding the money supply. This is because the seller of the bond receives payment from the Fed in the form of new money, which eventually gets deposited into the banking system and becomes available for lending and spending.

When the Fed Purchases Federal Government Bonds in the Open