When the New York Fed sells Treasury securities to a securities dealer
A) depository institutions deposits in the Fed decrease.
B) depository institutions deposits in the Fed increase.
C) the deposit balance of the security dealer in its bank decreases.
D) both a and c above.

Question

Quizplus · Accepted Answer

When the New York Fed sells Treasury securities, the securities dealer pays for them, which decreases the dealer's bank deposit balance. This transaction also reduces the reserves of the dealer's bank at the Fed, leading to a decrease in depository institutions' deposits in the Fed.

When the New York Fed Sells Treasury Securities to a Securities