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Transaction 7:buying Governance Securities
Transaction 7:buying Governance Securities
Transaction 7:buying Governance Securities
The FOMC buys and sells government securities to set the money supply. The is process is called open
market operations. The government securities that are used in open market operations are Treasury
bills, bonds and notes. If the FOMC wants to increase the money supply in the economy it will buy
securities
Open market operations (OMO) refers to the buying and selling of government securities in the open
market in order to expand or contract the amount of money in the banking system, facilitated by the
Federal Reserve
A government security is a bond issued by a government authority with a promise of repayment upon
maturity. Government securities such as savings bonds, treasury bills and notes also promise periodic
coupon or interest payments.
A government bond or "'sovereign bond"' is a bond issued by a national government, generally with a
promise to pay periodic interest payments and to repay the face value on the maturity date.
Why would you buy a government bonds? Investors buy bonds because: They provide a
predictable income stream. Typically, bonds pay interest twice a year. If the bonds are held to maturity,
bondholders get back the entire principal, so bonds are a way to preserve capital while investing
1. What is the meaning of FOMC?
a. Federal Open Marketing Company
b. Federal Open Market Committee
c. Federal Open Market Cyber
d. Federal Open Market Consistent