Suppose the Fed buys $400 worth of Treasury Securities from commercial banks. How would that transaction affect the balance sheet of the commercial banks? Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $200. Commercial banks’ Treasury Securities would fall by $200 and their Reserves would rise by $200.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
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Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 18CQ
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Suppose the Fed buys $400 worth of Treasury Securities from commercial banks. How would that transaction affect the
balance sheet of the commercial banks?
Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $400.
Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $400.
Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $200.
O Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $200.
Transcribed Image Text:Suppose the Fed buys $400 worth of Treasury Securities from commercial banks. How would that transaction affect the balance sheet of the commercial banks? Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $200. O Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $200.
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