question archive Suppose the Federal Reserve instructs the Trading Desk to purchase $1 billion of securities
Suppose the Federal Reserve instructs the Trading Desk to purchase $1 billion of securities
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Suppose the Federal Reserve instructs the Trading Desk to purchase $1 billion of securities.
Show the result of this transaction on the balance sheets of the Federal Reserve System and commercial banks.
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A purchase of $1 billion of securities will be:
Change in Federal Reserve Balance Sheet:
| Accounts | Debit | Credit |
|---|---|---|
| Trading Securities - Assets | 1 billion | |
| Reserve account of xxx Bank - Liabilities | 1 billion |
Change in Commercial Banks Balance Sheet
| Accounts | Debit | Credit |
|---|---|---|
| Reserve Accounts - Asset | 1 billion | |
| Demand Deposits - Liabilities | 1 billion |
