If you have $5,000 in wealth and the price level decreases 20 percent, then
A) the $5,000 will buy fewer goods and services.
B) the real value of the $5,000 decreases.
C) the $5,000 will buy more goods and services.
D) the real value of the $5,000 remains constant.

Question

Quizplus · Accepted Answer

If the price level decreases by 20 percent, then the cost of goods and services will decline. This means that $5,000 will be able to purchase more goods and services, increasing its purchasing power. Therefore, choice (C) is correct.

If You Have $5,000 in Wealth and the Price Level