Suppose every good costs $8 per unit and Molly holds $120.What is the real value of the money she holds?
A)$120.If the price of goods rises,to maintain the real value of her money holdings she needs to hold more dollars.
B)$120.If the price of goods rises,to maintain the real value of her money holdings she needs to hold fewer dollars.
C)15 units of goods.If the price of goods rises,to maintain the real value of her money holdings she needs to hold more dollars.
D)15 units of goods.If the price of goods rises,to maintain the real value of her money holdings she needs to hold fewer dollars.

Question

Quizplus · Accepted Answer

Molly can buy 120/8 = 15 units of goods with her $120. Therefore, the real value of the money she holds is 15 units of goods. If the price of goods rises, she would need to hold more dollars in order to maintain the same real value of her money holdings. For example, if the price of goods becomes $10 per unit, Molly would need to hold $150 to be able to buy the same 15 units of goods as before. Therefore, choice C is the correct answer.

Suppose Every Good Costs $8 Per Unit and Molly Holds