-Open market operations or sale and purchase of Government securities: it is also the most important tool. To increase the level of the money supply, the Fed buys Government securities from the Bank, other businesses or individuals, paid them by check); created stockpiles-a section in which the Bank can lend or invest, thereby increasing the amount of money in circulation. On the other hand, if the Fed wants to diminish the level of the money supply, it sold the Government securities for the Bank to withdraw the money from the Reserve Bank. Due to a low savings go, banks must reduce the amount of lending and therefore the level of money supply immediately decreases.
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