If the Fed buys a T-bill from an individual rather than from a bank, the effect on the money supply is
the same
The effect on the money supply in this scenario would depend on the individual’s actions with the money they receive from selling the T-bill to the Fed.
If the individual decides to hold on to the proceeds in the form of cash, then the money supply would not increase as a result of the transaction.
However, if the individual decides to deposit the proceeds into a bank account, then the bank’s reserves would increase. This would allow the bank to lend out more money, increasing the money supply.
In either case, the purchase of the T-bill by the Fed would inject additional funds into the economy and potentially stimulate economic growth.
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