If the price level rises by 10%, the purchasing power of $10,000 will:
A) increase to $11,000.
B) decrease to $9,000.
C) decrease to $1,000.
D) remain constant.

Question

Quizplus · Accepted Answer

When the price level rises, the value of money decreases, which means that the purchasing power decreases as well. Therefore, if the price level rises by 10%, the purchasing power of $10,000 will decrease by 10% to $9,000.

If the Price Level Rises by 10%, the Purchasing Power