The Federal Reserve impact the money supply by the monetary policy in which they use Expantionary monetary policy and contractionary monetary policy . Under they use the open market operation (OMO) mechanism in which they buying and selling the government security. Treasury bills is the government security ,  If the Fed buys back securities from large banks and securities dealers, it increases the money supply in the hands of the public. Conversely, the money supply decreases when the Fed sells a security. The terms "purchase" and "sell" refer to actions of the Fed, not the public.

For example, an open market purchase means the Fed is buying, but the public is selling. Actually, the Fed carries out open market operations only with the nation's largest securities dealers and banks, not with the general public. In the case of an open market purchase of securities by the Fed, it is more realistic for the seller of the securities to receive a check drawn on the Fed itself. When the seller deposits this in their bank, the bank is automatically granted an increased reserve balance with the Fed. Thus, the new reserves can be used to support additional loans. Through this process, the money supply increases.