Final answer:
The correct option is B). The largest liability of the Federal Reserve from the provided options is the currency in circulation, as it is a demand on the Fed's balance sheet.
Step-by-step explanation:
The student asked about the largest liability of the Federal Reserve (the Fed), choosing from a list that includes U.S. Treasury Securities, Currency in circulation, Bank reserves, and Gold reserves. In the context of the Federal Reserve, currency in circulation typically represents the largest liability. This is because the Fed issues currency, which is a liability on its balance sheet since the currency must be honored upon demand. The Fed's assets include reserves, which are monies that banks hold at the Federal Reserve, loans made to customers, and bonds. It's critical to note that gold reserves, while valuable, are not a liability of the Fed.