If you have $1,000 of money in the bank and the price level rises by 5 percent, your
A) money is worth more in terms of what it can purchase.
B) money is worth less in terms of what it can purchase.
C) money is worth the same in terms of what it can purchase.
D) purchasing power has increased.

Question

Quizplus · Accepted Answer

When the price level rises by 5 percent, it means that goods and services have become more expensive. Therefore, the same amount of money ($1,000) can buy less than before, meaning its purchasing power has decreased.

If You Have $1,000 of Money in the Bank and the Price