If the Federal Reserve receives and acts on a request from a foreign central bank to acquire securities from private dealers, this will result in a rise in total reserves of the U.S. banking system.

Question

Quizplus · Accepted Answer

When the Federal Reserve acts on behalf of a foreign central bank to acquire securities, it does so using the foreign central bank's funds, not by altering U.S. bank reserves. This transaction does not directly affect the total reserves of the U.S. banking system.

If the Federal Reserve Receives and Acts on a Request