If you have $1,000 in wealth and the price level increases by 20 percent, then
A) the $1,000 will buy fewer goods and services.
B) the $1,000 dollars will buy 20 percent more goods and services.
C) the real value of the $1,000 increases.
D) you will be able to buy fewer goods, but the real value of those goods will increase.

Question

Quizplus · Accepted Answer

When the price level increases by 20 percent, the purchasing power of money decreases, meaning the same amount of money ($1,000 in this case) will buy fewer goods and services than before the price increase.

If You Have $1,000 in Wealth and the Price Level