If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the
A)assets of First Union Bank decrease by $100,000.
B)assets of the Fed decrease by $100,000.
C)assets of First Union Bank change in composition but not in the amount.
D)liabilities of the Fed change in composition but not in amount.
E)liabilities of First Union decrease by $100,000.

Question

Quizplus · Accepted Answer

When the Fed purchases securities from a bank, the bank's assets change in composition (securities are exchanged for reserves) but the total amount remains the same.

If the Fed Purchases Securities in the Amount of $100,000