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

Question

Quizplus · Accepted Answer

Inflation means there is an overall increase in price levels which means the purchasing power of the dollar decreases. Therefore, $1,000 will buy fewer goods and services after a 20 percent increase in the price level.

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