If the Fed buys bonds from a private bank,________.
A) the private bank's total assets will increase
B) the private bank's composition of assets will change
C) the Fed's total liabilities will remain unaffected
D) the Fed's total assets will remain unaffected

Question

Quizplus · Accepted Answer

When the Fed buys bonds from a private bank, the bank's total assets don't necessarily increase, but the composition of its assets changes—typically from bonds to reserves. This transaction does not directly affect the Fed's total liabilities or assets in the context of this specific action's immediate impact on the bank.

If the Fed Buys Bonds from a Private Bank,________