After a $2 billion purchase of U.S. Treasury securities by the Federal Reserve, how will the Banking System's balance sheet specifically be affected?

When the Federal Reserve purchases $2 billion worth of U.S. Treasury securities, this transaction leads to a significant shift in the banking system's balance sheet. The correct answer highlights that there is no net change in total assets or liabilities; instead, the composition of the assets changes.

Initially, banks hold a certain amount in U.S. Treasury securities as part of their assets. When the Federal Reserve buys these securities, it pays the banks, which increases the reserves (another asset category) that banks hold at the Fed. Consequently, there is a transfer of value from the security assets to reserve assets on the balance sheet.

This means that while the banks will have $2 billion less in Treasury securities (which decreases one category of assets), they will have $2 billion more in reserves (which increases another category of assets). Therefore, the total amount of assets remains unchanged because the decline in one asset (securities) is exactly mirrored by the increase in another asset (reserves).

Thus, the correct choice correctly describes a reallocation within the banking system's assets without affecting the overall total of assets or liabilities, making it clear that the transaction alters the composition but not the quantity of assets or liabilities.