If the Fed purchases government securities from a commercial bank,which of the following will happen?
A) The Fed will increase the bank's reserves on deposit at the Fed.
B) The Fed will decrease the bank's reserves on deposit at the Fed.
C) The assets (government securities)of the Fed will decrease.
D) The assets (government securities)of the Fed will increase.
E) a and d

Question

Quizplus · Accepted Answer

When the Federal Reserve (Fed) purchases government securities from a commercial bank, it pays the bank, which increases the bank's reserves on deposit at the Fed. This transaction also means the Fed is acquiring assets (the government securities), so its assets increase.

If the Fed Purchases Government Securities from a Commercial Bank,which