Question

_______ decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Answer 1

Answer:

Open market operations -sales

Explanation:

Open market operations are one of the monetary policy tools that the Fed uses to regulate the money supply in the economy. They can be used to increase or decrease the supply of money in the country. In other words, they have both contraction and expansion effects on the economy.

Opens market operation involves purchasing and selling of bonds and securities in the market place. When the Fed sells bonds and securities from the banks, it decreases the money available for loaning out to firms and households. Banks use customers' deposits to purchase the government bonds leaving little left to loan out. Limited credit in the economy decreases the money available for business expansion and consumer consumption.

The government bonds end up in hands in public through the banks.