The Fed - The Fed's liabilities therefore consist of all...

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Unformatted text preview: The Fed's liabilities therefore consist of all Federal Reserve Notes in circulation plus all private bank deposits held at the Fed as reserves On the asset side, the Fed owns a large amount of government debt in the form of U.S. government bonds. These bonds have been issued by the U.S. Treasury to pay for current and past government deficits. A simplified example of the Fed's balance sheet is provided in Table 3 . Note that the Fed's total liabilities are equal to its total assets. TABLE 3 The Balance Sheet of the FED ($ values are in millions) Assets Liabilities Government bonds $300 Federal Reserve notes $250 Reserves of private 50 banks The Fed's control over the money supply stems from its ability to change the composition of its balance sheet. For example, the Fed may decide to purchase additional government bonds on the open market from bondholders or private banks. This type of action is referred to as an open market from bondholders or private banks....
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This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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