#542 Suppose the Federal Reserve instructs the

Suppose the Federal Reserve instructs the - Accounting

ChemistryExplain daily providing Q&A content “#542 Suppose the Federal Reserve instructs the" in Economics, 10 principles of economics, Accounting vs economic profit, Aggregate economics, American institute for economic research, Bachelor of economics

Get the Free Online Chemistry Q&A Questions And Answers with explain. To crack any examinations and Interview tests these Chemistry Questions And Answers are very useful. Here we have uploaded the Free Online Chemistry Questions. Here we are also given the all chemistry topic.

 ChemistryExplain team has covered all Topics related to inorganic, organic, physical chemistry, and others So, Prepare these Chemistry Questions and Answers with Explanation Pdf.

For More Chegg Questions

• Inorganic Chemistry
• Organic Chemistry
• Physical Chemistry

Join Our Telegram Channel for Covers All Update by ChemistryExplain:- Click Now

Free Chegg Question

Suppose the Federal Reserve instructs the Trading Desk to sell $850 million of securities. Show the result of this transaction on the balance sheets of the Federal Reserve System and commercial banks.

Free Chegg AnswerFor More Chemistry Notes and Helpful Content Subscribe Our YouTube Chanel - Chemistry Explain  

Free Chegg Answer

1. Step 1 of 5 

   Sale of securities by the federal bank

   The sale of securities by the federal bank is done by the trade dealers at FRNBY. Initially, FOMC instructs the FRNBY to sell the securities. After that government security dealers provide a list of securities quoting all prices of securities which they want to buy.

   Then FRNBY traders receive payments from government dealers. To buy the securities they withdraw from their deposit account. This is the selling process by the federal bank.

2. Step 2 of 5

   In the present case, the Federal Reserve Bank sells the securities of $850 million to commercial banks. Prepare the balance sheet of the federal bank after taking into consideration the effect of the above transaction as shown below.

   

3. Step 3 of 5

   Above balance sheet is showing the assets and liabilities of Federal Reserve Bank after selling the securities of $850 million to commercial banks. The treasury securities of Federal Reserve banks will get decreased by $850 million indicating the sales of $850 million and this transaction will also show the decrease in reserve account of securities dealer’s bank by $850 million.

4. Step 4 of 5

   Prepare the balance sheet for a commercial bank using the MS Excel sheet as shown below.

   

5. Step 5 of 5

   The above balance sheet is showing the assets and liabilities of commercial banks after purchasing the securities of $850 million. There would be a decrease in reserve account maintained by banks because they purchased the securities by using those reserves.