Prior to the recent financial crisis, the bulk of the Fed's assets on its balance sheet were ________ and its liabilities were ________.
A) U.S. Treasury bills; currency
B) loans; Treasury accounts
C) reserves; vault cash
D) stocks; foreign currency
E) currency; reserves

Question

Quizplus · Accepted Answer

Prior to the financial crisis, the Fed's balance sheet consisted mostly of U.S. Treasury bills as assets and currency as liabilities. This is because the Fed's main role is to conduct monetary policy by buying and selling Treasury bills to influence interest rates and the money supply. The Fed creates currency to purchase these assets, which becomes a liability on its balance sheet.

Prior to the Recent Financial Crisis, the Bulk of the Fed's