If the price level falls 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

If the price level falls by 10%, the value of goods and services decreases. This means that the same amount of money can now buy more goods and services, resulting in an increase in purchasing power. If the initial purchasing power was $10,000, a decrease in the price level by 10% will result in an increase to $11,000 ($10,000/0.9).

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