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Q. Monetary base and the supply of money?
It isn't possible for central bank to print and distribute money -which would increase their debt without increasing their assets. Rather, they change monetary base by purchasing and selling financial assets (generally government bonds) in so-called open market operations.
Let's say that central bank buys government securities for 100 million. They may pay for these bonds basically by printing new bills to amount of 100 million. At first this may seem suspicious and 'too simple'. Though remember that outstanding notes count as a liability for the central bank. When it purchases the government securities, its assets will increase by precisely the same amount as its liabilities.
Characteristically the central bank won't pay cash when it buys government securities. In its place, it will ask seller's bank to credit the individual's account and then will credit the bank's central bank account. This process is equivalent to paying in cash -monetary base will increase by same amount in both cases (remember that banks' assets in the central bank are comprises in the monetary base).
Because this will result in an increase in deposits in the banks, money supply will increase. By the multiplier effect, increases in the money supply would be more than 100 million. This way, central bank can influence the money supply several-fold by changing the monetary base.
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