Other things being equal, when the Fed buys U.S. government securities

Question

Quizplus · Accepted Answer

When the Fed buys U.S. government securities, its total assets and liabilities immediately expand by the exact amount of the purchase. This is because the Fed increases its holdings of securities, which are assets, and pays for them by increasing reserves held by banks, which are liabilities. This transaction goes on the Fed's balance sheet, causing both assets and liabilities to increase by the same amount.

Other Things Being Equal, When the Fed Buys U