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.
Answer: A
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The federal government receives most of its revenue from personal income taxes and payroll taxes.
Answer the following statement true (T) or false (F)
Rhonda's utility of wealth is 65 units at $5,000, 80 units at $7,000, and 95 units at $10,000. Starting from zero wealth, she must choose between options A and B
Option A gives her $7,000 for sure. Option B gives her $5,000 with probability 0.6 or $10,000 with probability 0.4. Rhonda A) will choose A. B) will choose B. C) is indifferent between A and B. D) needs more information to make a choice.
One implication of human capital theory is that college graduates should earn substantially less than high school graduates
a. True b. False Indicate whether the statement is true or false
A firm’s profits are calculated as the difference between ______.
a. all the money received for its products and all that was spent to produce them b. the cost of producing the firm’s last unit and the firm’s average per-unit cost c. the cost of production in the short run and the cost of production in the long run d. the maximum market price accepted for the firm’s product and the cost to produce it