When the price level increases, the purchasing power of money:
A)Increases by a similar amount
B)Stays the same since the purchasing power of money is not impacted by price levels
C)Decreases
D)First increases and then decreases as people get used to higher prices

Question

Quizplus · Accepted Answer

As the price level increases, the value of money decreases because it can purchase fewer goods and services. In other words, its purchasing power decreases. Therefore, the correct choice is C - Decreases.

When the Price Level Increases, the Purchasing Power of Money