Final answer:
Federal Reserve notes are liabilities of the Federal Reserve, representing an obligation to provide the holder with the face value of the note.
Step-by-step explanation:
Federal Reserve notes are considered to be liabilities of the Federal Reserve. When the Federal Reserve issues these notes, they represent a promise or obligation to provide the holder with the face value of the note on demand. These notes are part of the M1 money supply, which is the most liquid form of money and includes cash and checkable deposits. It is important to understand that while a bank counts cash in its vaults and reserves held at the Federal Reserve as assets, the Federal Reserve itself sees its issued notes as liabilities, because they owe the holders of notes the value represented by those notes.
Federal Reserve notes are considered to be liabilities of the Federal Reserve. This means that they represent a debt that the Federal Reserve owes to the holders of the notes. When the Federal Reserve issues currency, it becomes a liability on its balance sheet because it is a promise to pay the bearer of the note the designated amount on demand. For example, if you have a $20 bill, the Federal Reserve is liable to pay you $20 if you present that bill to them.