In 2010 the U

question 33

Multiple Choice

In 2010 the U.S.government was running a large deficit.Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit.If the Fed were to buy government bonds to help the government finance its expenditures,then

• A)the price level would fall,so the value of money would fall.
• B)the price level would fall,so the value of money would rise.
• C)the price level would rise,so the value of money would fall.
• D)the price level would rise,so the value of money would rise.

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Definitions:

Financial Leverage

Financial leverage refers to the use of borrowed money (debt) to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.