Does the total wealth possessed by the public change when the FED increases the money supply by an open market purchase of securities?

An open market purchase is a transaction where the FED buys government securities, such as bonds, from commercial banks and other private institutions. When the FED buys these securities, they pay for them by creating new money or reserves, which then enters the banking system. The intent behind an open market purchase is to increase the money supply and make it more liquid, which can help stimulate economic growth.

When the FED increases the money supply through an open market purchase of securities, they are injecting new money into the banking system. This increases the amount of money available to banks for lending, which can lead to lower interest rates and increased borrowing and spending by businesses and consumers.

The question is whether the increase in the money supply through the open market purchase of securities changes the total wealth possessed by the public. Total wealth is the sum of all assets (tangible and intangible) owned by individuals and institutions in an economy. When the FED purchases securities through an open market operation, the sellers of those securities receive newly created money. This increases the amount of money held by the public and may also increase the value of the securities still held by the public, due to the decreased supply of such securities and the increased demand for them. However, there is also the potential for the increase in the money supply to lead to inflation if the economy is operating at or near full capacity. Inflation reduces the purchasing power of money, which could negatively impact the real value of the public's wealth (in terms of the goods and services that can be purchased).

The change in total wealth possessed by the public following an open market purchase by the FED depends on a few factors, such as the current state of the economy and the extent to which the money supply increase leads to inflation. In a situation where the economy is operating below full capacity, an open market purchase may have a positive effect on public wealth, as the increased money supply can lead to increased spending, higher output, and greater wealth creation. On the other hand, if the economy is operating at or near full capacity, the increase in money supply may primarily lead to inflation, which could erode the real value of the public's wealth. Therefore, the total wealth possessed by the public may change when the FED increases the money supply through an open market purchase of securities, but the overall impact depends on various factors, and the outcome may be positive, negative, or neutral in different scenarios.