When the Open Market Committee Buys $1 Million Worth of Bonds

question 119

True/False

When the Open Market Committee buys $1 million worth of bonds, $1 million of reserves is instantly put into the banking system.

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Definitions:

Semiannual Interest

Interest that is computed and disbursed semi-annually, commonly associated with bonds and loans.

Straight-Line Method

A method of calculating depreciation or amortization by evenly distributing the cost over the useful life of the asset.

Amortization

The process of gradually writing off the initial cost of an intangible asset over a period of time.

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.