The purchasing power of money
A)rises when prices fall.
B)rises when prices rise.
C)is set by the Fed in January of each year.
D)is constant.

Question

Quizplus · Accepted Answer

The purchasing power of money increases when prices fall because the same amount of money can buy more goods and services due to the lower prices. Conversely, when prices rise, the purchasing power of money decreases as the same amount of money can buy fewer goods and services. Therefore, option A is the correct answer. Option B is incorrect. Option C is also incorrect as the Fed does not set the purchasing power of money in January of each year. Option D is also incorrect as the purchasing power of money is not constant and can vary depending on various factors such as inflation, supply and demand, and changes in the economy.

The Purchasing Power of Money