When the Fed sells a government security to the public, how does it usually receive payment for the security?
A)by accepting checks on bank accounts
B)by drawing money out of circulation
C)by decreasing member bank profits not distributed by the Fed
D)by decreasing reserves in bank accounts at the Fed

Question

When the Fed sells a government security to the public, how does it usually receive payment for the security?
A)by accepting checks on bank accounts 
B)by drawing money out of circulation 
C)by decreasing member bank profits not distributed by the Fed 
D)by decreasing reserves in bank accounts at the Fed

Quizplus · Accepted Answer

When the Fed sells a government security to the public, it usually receives payment for the security by accepting checks on bank accounts. The buyers of the securities typically write checks to their banks, which then transfers the funds from the buyers' accounts to the Fed's account. The Fed then credits the banks' reserve accounts with the amount of the sale.

When the Fed Sells a Government Security to the Public