If the central bank purchases the government securities from the commercial banks, it is likely to

Increase the money supply in the economy.

The correct answer is Option (1) → Increase the money supply in the economy.

When the central bank purchases government securities from commercial banks, it pays them money for these securities. This payment increases the reserves of commercial banks.

With higher reserves, banks can:

• Lend more to the public,

• Create more credit, and

• Ultimately increase the overall money supply in the economy.