A central bank buys government bonds. What follows in the short run?

1. Buying bonds means the central bank hands out money and takes in paper, so money enters the economy. 2. With the money supply larger, banks have more money to lend. 3. Competing to lend a bigger pool, banks reduce interest rates. 4. Cheaper credit generally stimulates economic activity, so activity lifts. 5. The chain runs supply up, rates down, activity up, and all three must move together. 6. Options pairing a larger money supply with higher rates invert the second link, which is the usual trap. 7. Options starting with a smaller money supply describe a bond sale, which is the opposite operation. _Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.2 The Federal Reserve System_