Consider a $2 billion open market purchase of U.S.Treasury securities by the Federal Reserve.The Fed's balance sheet will specifically show:

Question

Quizplus · Accepted Answer

When the Fed purchases $2 billion worth of U.S. Treasury securities, it will increase the asset category of securities by $2 billion in its balance sheet. Simultaneously, to finance this purchase, the Fed will increase the liability category of reserves by $2 billion, which represents the increase in the amount of money that commercial banks hold at the Fed. Therefore, the correct answer is D, which is the option that says "An increase in the asset category of securities and the liability category of reserves by $2 billion."

Consider a $2 Billion Open Market Purchase of U