The Federal Reserve Banks buy government securities from commercial banks. As a result, the checkable deposits

Question

Quizplus · Accepted Answer

When the Federal Reserve Banks buy government securities from commercial banks, the banks' reserves increase but their checkable deposits remain unchanged. This is because the transaction involves a transfer of cash reserves from the Federal Reserve Banks to the commercial banks, which increases the banks' reserves but does not affect the amount of checkable deposits they hold. Therefore, option A is the correct choice.

The Federal Reserve Banks Buy Government Securities from Commercial Banks