They do this by selling new U.S. securities to the public. The Fed oversees the banking system and controls the size and growth of the money supply. It owns, buys, and sells previously issued U.S. securities. The Opportunity Cost of Having a Money Demand Money has alternative uses. If you hold money as M1, you give up the opportunity to earn interest on that money if it were M2.
Money supply increases cause inflation.
V changes by predictably small amounts. Y changes also. There are many interest rates, one for each of the different kinds of markets for money. While each may have a different value, they usually increase or decrease in tandem, since savers can put their money into any market - usually the one that delivers the better return. They keep their money as M1.