Suppose that the Federal Reserve decides to increase the money supply with a $300 purchases of Treasury bills. Complete the tables that represent the financial position of the Federal Reserve and commercial banks after this open-market operation. Be sure to use a negative sign for reduced values.For the Federal Reserve, what are assets? What are liabilities?

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11-06-2020
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Suppose that the Federal Reserve decides to increase the money supply with a $300 purchases of Treasury bills. Complete the tables that represent the financial position of the Federal Reserve and commercial banks after this open-market operation. Be sure to use a negative sign for reduced values.For the Federal Reserve, what are assets? What are liabilities?

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SerenaBochenek SerenaBochenek · Answer 1 · 2020-06-11T08:34:09+02:00

Answer:

The correct answer to the following question will be "Treasury bills, Monetary Base ". The further explanation is given below.

Explanation:

(A)...

Assets: $300 (tax bills)

If it's bought by Federal Reserve, it's going to be the asset portion.

(B)...

Reserves: $300 (Commercial Banking liabilities)

Based mostly on reserve requirements, banks would then deposit funds to Federal Reserve. All of the lenders will carry through.

(C)...

Treasury Deposits or bills = -$300

Certain bills would go down by $300 as either a result of Federal Reserve purchases.

(D)...

Bookings or Reserves: + $300

This would be growing by $300 because of the sale of treasury bills. It won't bring any changes to the aspect of liability.

If researchers add financial treasury obligations with reserves as well as circulating documents, so it becomes a financial basis. Such that the answer given is indeed the appropriate one.