The Federal Reserve, the United States of America's central bank, is comprised of twelve district banks who work in concert as intermediaries between the business community and the Federal Reserve itself. Central banks' roles include controlling the money supply, provide price stability, regulate commercial banks, and ensuring the stability of the macro-economy. (Wright & Quadrini, 2009) The Federal Reserve most often achieves its goals through the use of monetary policy tools. The most commonly utilized tool of monetary policy is open market operation. Expansionary monetary policy in particular seeks to stimulate the growth of an economy most often through the open market, because of this tool's relative flexibility. ("Monetary policy basics," n.d.) They most typically purchase government bonds to do so. According to Boundless (n.d.), the effects of the Federal Reserve's expansionary activities improve: •Increase of the money supply◦Increase in accessible credit◾Business expansions (in theory) •Decrease of interest rates◦Increase in investment (in theory) •Increase in cash for banks/institutions◦Increased ability to take loans from banks◾Decrease in loan interest rates …show more content…
Note, however, that this purchase was made in exchange for deposit accounts; as deposit accounts are liabilities. Assets comprise of liabilities plus equities; this increase in assets would be appropriately reflected in the liabilities section (or across the liabilities and capital sections) of the balance sheet. See, below, a sample balance sheet for the Federal Reserve, based on data from October 2017 ("Quarterly report," 2017), identifying the areas of the balance sheet that may / can be affected by this purchase of $10