If the Fed buys $1 million in government securities from Bank A, then the immediate effect of this transaction is an increase in
A) money supply M1.
B) Bank A's excess reserves.
C) Bank A's liabilities.
D) Bank A's required reserves.

Question

Quizplus · Accepted Answer

When the Fed buys government securities from Bank A, it credits Bank A's reserve account, increasing its excess reserves.

If the Fed Buys $1 Million in Government Securities from Bank