By TheStreet Staff What Are Open Market Operations?Open market operations refer to a central bank’s purchase and sale of government securities to implement monetary policy. When a central bank buys its nation’s bonds, it increases the money supply, and when it sells them, money supply decreases. All of these buy-and-sell transactions are conducted through open market operations. How Do Open Market Operations Affect the Money Supply?Open market operations affect the money supply through banks’ reserves, and the approach can be either passive or active. Passive refers to targeting a specific int…