Suppose the Fed Purchases $1,000 of Government Securities from the General

Multiple Choice

Suppose the Fed purchases $1,000 of government securities from the general public who then deposit the proceeds into their checking accounts in commercial banks.Which pair of the T-accounts below shows this transaction?

A) $\begin{array}{cc|lcc}\hline{\text { Federai Reserve }} && {\text { Commercial Banks }} \\\hline \text { Assets } & \text { Liabilities } & \text { Assets } &{\text { Liabilities }} \\\hline \text { Govemment } & \text { Checkable } & \text { Reserves }+1,000 & \text { Checkable } \\\text { Securities }+1,000 & \text { Deposits }+1,000 & & \text { Deposits }+1,000 \\\hline\end{array}$ .


B) $\begin{array}{cc|lcc}\hline{\text { Federai Reserve }} && {\text { Commercial Banks }} \\\hline \text { Assets } & \text { Liabilities } & \text { Assets } &{\text { Liabilities }} \\\hline \text { Govemment } & \text { Checkable } & \text { Reserves }+1,000 & \text { Checkable } \\\text { Securities }+1,000 & \text { Deposits }+1,000 & & \text { Deposits }+1,000 \\\hline\end{array}$

C) $$\begin{array} { | c c | l l l | } \hline { \text { Federal Reserve } } && { \text { Commercial Banks } } \\\hline \text { Assets } & \text { Liabilities } & \text { Assets } &{ \text { Liabilities } } \\\hline \text { Reserves } - 1,000 & \text { Checkable } & \text { Reserves } + 1,000 & \text { Checkable } \\& \text { Deposits } - 1,000 & & \text { Deposits } + 1,000 \\\hline\end{array}$$
D) $$\begin{array} { | c c | l c l } \hline { \text { Federal Reserve } } && { \text { Commercial Banks } } \\\hline \text { Assets } & \text { Liabilities } & \text { Assets } & { \text { Liabilities } } \\\hline \text { Govemment } & \text { Commercial Banks' } & \text { Government } & \text { Checkable } \\\text { Securities } + 1,000 & \text { Reserves } + 1,000 & \text { Securities } - 1,000 & \text { Deposits } & - 1,000 \\\hline\end{array}$$