How does the [USA] fed increase or decrease the amount of cash in circulation?

Question

I’ve heard that this happens through banks, but what financial mechanism is used to do this? It can’t simply be “Hey Chase Bank, here’s $100 million for free”.

In: 14

Answer 1

In addition to lending money to banks, in the past the fed bought bonds on the public market which increased the money supply, and they are currently letting those bonds mature which will reduce the money supply