Suppose the Fed purchases $1,000 of government securities from the general public who then deposit the proceeds into their checking accounts in commercial banks. Which pair of the T-accounts below shows this transaction?

Question

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The transaction involves two parties: the Fed and the general public. The Fed purchases $1,000 of government securities from the general public, which means the Fed's securities holdings increase by $1,000 and the general public's checking account balances increase by $1,000.
In the T-accounts, this transaction can be shown as follows:

Fed's balance sheet before the transaction:
Assets | Liabilities
------------|-----------
 Securities: $X  | Reserve balances: $Y

General public's balance sheet before the transaction:
Assets | Liabilities
------------|-----------
 Checking deposits: $Z  | Securities: $W

After the transaction, the T-accounts should show:

Fed's balance sheet after the transaction:
Assets | Liabilities
------------|-----------
 Securities: $X+$1,000  | Reserve balances: $Y+$1,000

General public's balance sheet after the transaction:
Assets | Liabilities
------------|-----------
 Checking deposits: $Z+$1,000  | Securities: $W-$1,000

Option B is the only T-account that correctly shows how the Fed's balance sheet and the general public's balance sheet are affected by the transaction.

Suppose the Fed Purchases $1,000 of Government Securities from the General