Principles of Macroeconomics / Unit 12 MAC 1114 short lesson, about 20 seconds
Open Market Operations
Captions available
The idea
The central bank buys and sells government bonds, and this is its main traditional tool. Buying injects reserves into the banking system; selling withdraws them.
In practice
Treat the central bank as outside the system: money flows from it when it buys, to it when it sells.
Where people slip
It buys and sells existing bonds in the market, not new debt from the Treasury.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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