The supply of money increases whena. the value of money increases. b. the interest rate increases. c. the Federal Reserve purchases bonds. d. velocity increases.

Option (C) is correct.

Explanation:

When federal reserve purchases bonds from the public then this will lead to an increase in the money supply. It is come under the category of open market purchases. It is a monetary policy instrument that is used by the central bank of a nation to control the money supply in an economy. If federal reserve sells government bonds to the public then this will lead to a fall in the money supply.