If the FOMC Orders a Purchase of Government Securities from Member

question 119

Multiple Choice

If the FOMC orders a purchase of government securities from member banks, where does the FOMC get the money to pay for the securities?

• A)It creates money to pay for the securities by adding the purchase amount to the banks' reserves.
• B)It pays for the securities with new Federal Reserve notes.
• C)It borrows the necessary funds from the Treasury.
• D)It auctions off part of the securities it already owns.

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Definitions:

Activity Variance

A measure of the difference between planned or budgeted activity levels and actual activity levels.

Personnel Expenses

Costs related to the compensation and benefits of a company's employees.

Budgeting

A process of creating a plan to spend your money, allowing you to determine in advance whether you will have enough money to do the things you need or want to do.

Activity Variance

The difference between the expected cost of an activity and its actual cost, often used in budgeting and cost management to analyze performance.