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.

---

Definitions:

Market Value

The current price at which an asset or service can be bought or sold, determined by supply and demand in the market.

Book Value Per Share

Book Value Per Share is a financial metric that calculates a company's equity available to common shareholders divided by the number of outstanding shares.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest in the company.

Common Share

A type of equity ownership in a corporation, entitling holders to vote on corporate matters and receive dividends.