If a central bank wanted to increase the amount of money in an economy, it would D. buy bonds in open market operations.
When the central bank buys bonds:
- It increases money supply in the economy
- It does this by paying for the bonds such that money flows from the central bank into the economy
Buying bonds is one of the strategies that a central bank can use when it embarks on an expansionary monetary policy to increase the amount of money in the economy and spur growth.
In conclusion, the central bank can buy bonds to increase money supply.
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