Sharon sells a government security worth $4,600,000 to the Federal Reserve Bank of Kansas City. She then deposits the funds in her checking account at First Commerce Bank. Her checking account had a $150,000 balance before this deposit. The reserves of First Commerce Bank would:
A) Increase by $4,750,000
B) Increase by $4,600,000
C) Decrease by $4,600,000
D) Decrease by $4,450,000

Question

Quizplus · Accepted Answer

When Sharon sells the government security to the Federal Reserve Bank of Kansas City, she receives $4,600,000. When she deposits this amount in her checking account at First Commerce Bank, the bank's reserves increase by the same amount, which is $4,600,000. Therefore, the answer is B, Increase by $4,600,000.

Sharon Sells a Government Security Worth $4,600,000 to the Federal