U.S. Treasury deposits at the Fed are ________ for the Fed but ________ for the Treasury. Thus an increase in U.S. Treasury deposits ________ the monetary base.

Question

Quizplus · Accepted Answer

U.S. Treasury deposits at the Fed are a liability for the Fed because they owe the money back to the Treasury, but an asset for the Treasury because it represents the money they have on deposit. Therefore, an increase in U.S. Treasury deposits at the Fed will decrease the monetary base because it reduces the amount of money available for the Fed to lend out.

US Treasury Deposits at the Fed Are ________ for the Fed