Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A.

-Refer to the scenario above.After this transaction,Bank A's total liabilities equal ________.
A) $110 million
B) $120 million
C) $130 million
D) $140 million

Question

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A.
 
-Refer to the scenario above.After this transaction,Bank A's total liabilities equal ________.
A) $110 million 
B) $120 million 
C) $130 million 
D) $140 million

Quizplus · Accepted Answer

When the Fed buys $10 million in bonds from Bank A, Bank A receives $10 million in reserves from the Fed. This increases Bank A's assets by $10 million, which is offset by an increase in Bank A's liabilities, as reserves are a liability of banks. Therefore, Bank A's total liabilities increase by $10 million, from $110 million to $120 million.

Scenario: the Following Table Shows the Initial Balance Sheets of Bank