How does the Federeal Reserve control the amount of money in circulation?

By (1) setting the short term interest rate that banks must pay from loans from the Federal reserve and (2) setting the "reserve requirement" that banks must leave on deposit with the Federal Reserve to satisfy demand deposits. The restricts the ability of banks to open new checking accounts and issue new loans.

and one more, Open Market Operations, -- the buying and selling of government securities.

The Federal Reserve controls the amount of money in circulation through various mechanisms. One of the main ways it does this is by setting the short-term interest rates that banks must pay for loans from the Federal Reserve. This interest rate is called the federal funds rate.

When the Federal Reserve wants to increase the money supply, it decreases the federal funds rate. This makes it cheaper for banks to borrow money, which encourages them to take out more loans and extend more credit to businesses and individuals. This increase in lending and credit creation leads to more money being introduced into the economy.

Conversely, when the Federal Reserve wants to decrease the money supply, it raises the federal funds rate. This makes it more expensive for banks to borrow money, which limits their ability to extend credit. This decrease in lending and credit creation reduces the amount of money in circulation.

Another way the Federal Reserve controls the money supply is through the reserve requirement. The reserve requirement is the amount of money that banks are legally required to hold in reserve, typically in the form of deposits at the Federal Reserve. By changing the reserve requirement, the Federal Reserve can affect the ability of banks to create new money through lending.

When the reserve requirement is lowered, banks have more excess reserves, which can be used to extend loans and create more money in the economy. Conversely, when the reserve requirement is raised, banks need to hold more reserves, which reduces the amount of money they have available for loans and decreases the money supply.

In addition to setting interest rates and reserve requirements, the Federal Reserve also uses a tool called open market operations to control the money supply. Open market operations involve the buying and selling of government securities, such as Treasury bonds, in the open market.

If the Federal Reserve wants to increase the money supply, it buys government securities from banks and other financial institutions. This puts more money into the hands of these institutions and injects more money into the economy. Conversely, if the Federal Reserve wants to decrease the money supply, it sells government securities to banks and other financial institutions, draining money from the economy.

By using these various tools - setting interest rates, adjusting reserve requirements, and conducting open market operations - the Federal Reserve can control the amount of money in circulation and influence the overall economic conditions.