Open market

In economics, the Open Market is the term used to refer to the environment in which bonds are bought and sold.

When the money supply is low, a central bank may choose to do what is known as Open Market Operations to increase reserves. Open Market Operations are when the central bank buys bonds from other banks in exchange for cheques. These local banks then cash the cheques, which allow them to take money from the central bank. This action thus decreases any credit the local banks may owe to the central bank, and also increases their money supply. This thus increases reserves.