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When the Fed wants to increase the money supply in the U.S., it buys bonds from banks in the open market and uses a pretty simple formula to calculate how much money it actually is creating.

Instead of using gold as the basis for the monetary system, as was the custom until 1971, the Fed requires its member banks to keep certain specific amounts of money on reserve as a means of keeping a lid on the uncontrolled expansion of fiat money — in other words, to keep the money supply from exploding. These reserve requirements are the major safeguard of the system.

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What you get paid is called salary

When the economy slows down, the Fed attempts to jump-start it by lowering interest rates. The Fed lowers interest rates by injecting money into the system. The monetary injection is sort of like a flu shot for an ailing economy. But instead of a vaccine, the Fed injects money into the system by buying bonds from the banks.

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