Question

if a bank sells $10 million of bonds to the fed to pay back $10 million on the loan it owes,what is the effect on the level of checkable deposits?

Answer 1

Step-by-step explanation:

Selling bonds to the Fed doesn't directly impact checkable deposits. When a bank sells bonds to the Fed, it receives money (reserves) in return. If the bank uses this money to pay back a loan, it reduces its liabilities but doesn't directly affect checkable deposits unless customers decide to change their deposit levels based on the bank's actions.