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The Fed Buys $100 Million of Government Securities from Bank

Question 244

Multiple Choice

The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?


A) Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million.
B) Securities increase by $100 million and reserves of Bank A increase by $100 million.
C) Securities increase by $100 million and reserves of Bank A decrease by $100 million.
D) Securities decrease by $100 million and reserves of Bank A increase by $100 million.

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