Other things the same,as the price level rises,the real value of a dollar
A)rises,and interest rates rise.
B)rises,and interest rates fall.
C)falls,and interest rates rise.
D)falls,and interest rates fall.

Question

Quizplus · Accepted Answer

When the price level rises, the purchasing power of the dollar falls. This means that one dollar can buy fewer goods and services than before. Therefore, the real value of the dollar falls. When the value of the dollar falls, lenders will require a higher interest rate to compensate for the expected inflation. So, interest rates will rise as the real value of the dollar falls.

Other Things the Same,as the Price Level Rises,the Real Value