If Bank A sells a $100,000 U.S.Treasury bond to the Fed, Bank A's excess reserves will:

Question

Quizplus · Accepted Answer

When Bank A sells a $100,000 U.S. Treasury bond to the Fed, the Fed pays Bank A $100,000. This increases Bank A's reserves by $100,000. Since Bank A is selling the bond to the Fed, there is no offsetting decrease in assets, so the increase in reserves is equal to the sale price of the bond. Therefore, Bank A's excess reserves will increase by $100,000.

If Bank a Sells a $100,000 U