In what way does open market operation affect the economy?

Open market operations have either contraction or expansion effect in the economy.

If the central bank decides to increase money supply, therefore expanding the economy, they can buy securities from banks in exchange, injecting money into the economy. The banks will be able to offer more loans to businesses and individuals which reduces the interest rates for the loans.More productive activities leads to the expansion of the economy.

Also, if the central bank decides to reduce the money supply, leading to a contraction of the economy, they can sell securities to the banks taking money out of the economy. Decrease in money supply leads to an increase in the interest rate which discourages borrowing through loans. Consequently, the economy tends to slow down a bit.