How does a central bank typically implement contractionary monetary policy through government securities?

A central bank uses contractionary monetary policy to reduce the money supply in the economy, which can help control inflation. One common method is by selling government securities, like bonds, in the open market. When the central bank sells these securities, buyers pay with their bank reserves, which decreases the amount of money banks have to lend out. For example, if a central bank sells $1 million in bonds, the banks pay for them, and their reserves drop by that amount, leading to less money available for loans. As a result, interest rates may rise, making borrowing more expensive and slowing down economic activity.