As the price level falls,
A) the purchasing power of cash holdings rises.
B) the purchasing power of cash holdings falls.
C) the purchasing power of cash holdings remains constant.
D) cash holdings turn into dollar-denominated assets.
E) none of the above

Question

Quizplus · Accepted Answer

As the price level falls, the cost of goods and services decreases, which means you can buy more for the same amount of money. This results in an increase in the purchasing power of cash holdings.

As the Price Level Falls