If the Fed sells securities worth $10 million to a commercial bank, the Fed's balance sheet will show

Question

Quizplus · Accepted Answer

When the Fed sells securities worth $10 million to a commercial bank, it effectively removes $10 million from the banking system, which is reflected as a decrease in bank reserves. Simultaneously, the Fed's holdings of securities decrease by the same amount, as those securities are transferred to the commercial bank.

If the Fed Sells Securities Worth $10 Million to a Commercial