Purchase or sale
Removed from or added to
Fall or increase
By or to
From or into
Increase, decrease, or maintain
Suppose you examine the central bank's balance sheet and observe that since the previous day, reserves had risen by $100 million. In addition, on the asset side of the central bank, what activity did they carry out earlier in the day to lead to these changes in the balance sheet? Do you think by carrying out this activity the central bank was aiming to increase, decrease, or maintain the size of the money supply?
The central bank conducted an open market purchase of $100 million with a commercial bank. This transaction would involve $100 million of securities being removed from the central bank's balance sheet. There would be a fall of $100 million in reserves to reflect the related payment by the commercial bank from its reserve account. By carrying out this activity, the central bank was aiming to decrease the size of the money supply.