If the Fed purchases $50,000 in T-bills from a bank, by how much will the bank's excess reserves increase?

Question

Quizplus · Accepted Answer

When the Fed purchases T-bills from a bank, it will credit the bank with the purchase price by adding money to the bank's reserve account held at the Fed. This will increase the bank's total reserves by the same amount as the T-bill purchase, in this case, $50,000. Therefore, the correct answer is (A).

If the Fed Purchases $50,000 in T-Bills from a Bank