Final answer:
The issuance of bonds is a cash inflow for the entity issuing them, as they receive capital from investors. When a central bank buys bonds, it increases the money supply, while selling bonds decreases it.
Step-by-step explanation:
The issuance of bonds by a company represents a method of accessing financial capital and is considered a cash inflow for the entity issuing the bonds. In this scenario, the company receives money from investors who purchase the bonds, providing the company with immediate capital in exchange for the promise of future interest payments and the repayment of the principal amount at maturity.
When it comes to the effect on money supply, the actions of a central bank are relevant. A central bank buying bonds results in money flowing to the banks, thereby increasing the money supply in circulation. Conversely, when a central bank sells bonds, it causes an outflow of capital from the economy's banking system to the central bank, which decreases the money supply.