The instructor is a retired economist. I actually do understand OMOs as BBl wrote. My original question wondered where my purchase money went. I assume it goes to the Federal Reserve along with all the rest of the purchase money from not only the Primary Dealers but any other large entity that bought the securities at an earlier auction. However, what happens to this purchase money - does it just reside at the Fed and is used to moderate money supply, whatever that means, or is it used for everyday government expenses? The excerpt below doesn't say anything about creating currency or setting interest rates:
From the New York Fed: http://www.newyorkfed.org/aboutthefed/f ... fed41.html
Treasury Auctions The U.S. Government currently auctions Treasury bills, and notes to finance the public debt.
Most of the securities are bought by primary dealers which are large securities dealers; a small amount is purchased by individual investors. Bids are submitted through Treasury Direct or through depository institutions, the Federal Reserve Bank of New York, and the Bureau of Public Debt. The Treasury's Bureau of Public Debt and the Federal Reserve Bank of New York offer bidding by computer to institutional investors such as banks, brokers and dealers.The U.S. Treasury Department regularly borrows to finance the Federal Government's deb.
From 1980 to 2006, the public debt of the United States grew from $930 billion to $8.68 trillion. Approximately one-half of that debt is held in Treasury bills, notes, and bonds, or "treasuries."
Thanks again for your answers.