If a $1 Million Open Market Purchase by the Fed

Multiple Choice

If a $1 million open market purchase by the Fed generates a new deposit at a bank that immediately causes the bank's reserves held at the Fed to increase by $1 million, then the T-account effects are that the bank's assets and liabilities ________ by $1 million and that the Fed's assets and liabilities ________ by $1 million.

A) decline; decline
B) increase; decline
C) decline; increase
D) increase; increase