Question

the money supply represents the amount of money the federal reserve bank makes available for people to buy goods and services. quizlert

Answer 1

The main source of income for the Federal Reserve System is interested in US government assets that the Federal Reserve has purchased through open market activities.

What determines the supply of money?

The Central Bank controls the money supply through its "monetary policy," and the economy must function with that predetermined amount of money. The money supply is seen as entirely vertical because the economy has no bearing on its amount (on models).

By increasing or decreasing the monetary base, the Fed can regulate the amount of money in circulation. The amount of money in circulation plus the deposits that depository institutions have with the Federal Reserve make up the monetary base, which is correlated with the size of the Fed's balance sheet.

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