What practice involves the Fed buying government and other securities to increase the money supply?

The practice that involves the Fed buying government and other securities to increase the money supply is known as quantitative easing. This monetary policy tool is used during times of economic downturn or when interest rates are already near zero, limiting the effectiveness of traditional monetary policy. By purchasing securities, the Federal Reserve injects liquidity into the financial system, which lowers interest rates and encourages borrowing and investment by businesses and consumers. This, in turn, is intended to stimulate economic growth and stabilize financial markets.

Quantitative easing is distinct from other methods such as credit easing, which focuses on improving the supply of credit specifically by targeting certain types of borrowers and assets. Open market operations, while related, generally refer to the broader set of transactions in buying and selling government securities to control short-term interest rates and the money supply. Liquidity provision is more focused on ensuring that financial institutions have enough liquid assets to meet their obligations, rather than explicitly increasing the overall money supply.