When the Federal Reserve purchases a U.S. Treasury bond for $1 million by writing a check, when the check returns, the Fed's balance sheet will show:
A. An increase in assets and a decrease in liabilities of $1 million.
B. Only an increase in assets of $1 million.
C. Only an increase in liabilities of $1million.
D. An increase in assets and liabilities of $1 million.
Answer:D
When the Federal Reserve purchases a U.S. Treasury bond for $1 million by writing a check, when the check returns, the Fed's balance sheet will show:
A. An increase in assets and a decrease in liabilities of $1 million. B. Only an increase in assets of $1 million. C. Only an increase in liabilities of $1million. D. An increase in assets and liabilities of $1 million.