When the Fed Buys a Treasury Bill from the Public

question 5

Multiple Choice

When the Fed buys a Treasury bill from the public, how does it usually pay for the T-bill?

• A)by writing a check on a commercial bank account 
• B)by printing new Federal Reserve notes 
• C)by creating new reserves in bank accounts 
• D)by prepaying taxes into the Treasury's account

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Definitions:

Avalanche

In finance, an avalanche method refers to a strategy of paying off debts by starting with the highest interest rate debt first.

Security Interest

A legal claim or lien on collateral that has been pledged, typically to obtain a loan, ensuring the right to take possession if repayment is not made.

Assigns

In legal terms, refers to the transfer of a property right or title to another person.

Subordinated

A classification of debt that ranks below other debts with regard to claims on assets or earnings.