The government sells $1 million of bonds to the commercial banks. It then uses the money raised to give subsidies to sugar producers, who deposit them in their bank accounts. Assuming that notes and coins in circulation stay the same, what is the immediate effect on the assets and liabilities of the commercial banks?
- Aassets: bonds +$1 million; liabilities: reserves –$1 million; unchanged
- Bassets: bonds +$1 million; liabilities: deposits +$1 million
- Cassets: reserves –$1 million; liabilities: deposits –$1 million
- Dassets: unchanged; liabilities: unchanged