Suppose an economy produces only smart phones. If the price level falls, the value of currency
A)rises, because one unit of currency buys more smart phones. This is called deflation.
B)rises, because one unit of currency buys more smart phones. This is called inflation.
C)falls, because one unit of currency buys fewer smart phones. This is called deflation.
D)falls, because one unit of currency buys fewer smart phones. This is called inflation.

Question

Suppose an economy produces only smart phones. If the price level falls, the value of currency
A)​rises, because one unit of currency buys more smart phones. This is called deflation.
B)​​rises, because one unit of currency buys more smart phones. This is called inflation.
C)​​falls, because one unit of currency buys fewer smart phones. This is called deflation.
D)​​falls, because one unit of currency buys fewer smart phones. This is called inflation.

Quizplus · Accepted Answer

When the price level falls, each unit of currency can purchase more goods, indicating an increase in the currency's value. This situation is referred to as deflation.

Suppose an Economy Produces Only Smart Phones