Likewise, the Fed can increase the supply of money by reducing the reserve requirements. Purchasing and selling securities, usually U.S. government issued securities . Funds are eventually deposited into commercial banks when the Fed buys government obligations. The Fed may sell securities, thus reducing the supply of money. By controlling the supply of money the Fed impacts the overall health of the economy including inflation, the value of the dollar in relationship to other currencies and recessions.
Money is anything that can be used to purchase goods or services.
Most people think of money as cash, i.e., coin and paper bills. Cash is also called currency. Yet, most purchases are made by check. A check is money as it can be used as money. M-1A is defined as currency and demand deposits.