When the Fed makes a discount loan to a bank, the assets and liabilities of both the bank and the Fed do which of the following?

Question

Quizplus · Accepted Answer

When the Fed makes a discount loan to a bank, the bank's liabilities increase by the amount of the loan, while its assets increase by an equal amount. The Fed's assets also increase by the amount of the loan, while its liabilities increase by an equal amount. Therefore, both the assets and liabilities of the bank and the Fed increase by the amount of the loan.

When the Fed Makes a Discount Loan to a Bank