Question

Select all that apply

Which of the following transactions occur when the Fed sells government securities to the public?
A.No change to the checkable deposits.
B. The check written against the commercial bank is cleared.
C. The commercial bank's reserves decline.
D. The commercial bank's reserves increase.
E. Checkable deposits are reduced.

Answer 1

When the Fed sells government securities to the public, the commercial bank's reserves decline, checkable deposits are reduced, and the check written against the commercial bank is cleared.

Step-by-step explanation:

When the Fed sells government securities to the public, several transactions occur. First, the commercial bank's reserves decline as they purchase the securities from the public using their reserves. Second, checkable deposits are reduced because customers of the commercial bank receive payment for the securities in the form of checkable deposits. Finally, the check written against the commercial bank is cleared, meaning that the bank transfers funds from the buyer's account to the seller's account.