The value (purchasing power) of each unit of money
A) is largely independent of the money supply.
B) tends to increase as the money supply expands.
C) increases as the general level of prices rise.
D) is inversely related to the general level of prices.

Question

Quizplus · Accepted Answer

The value (purchasing power) of each unit of money is inversely related to the general level of prices. As prices increase, the same amount of money is able to purchase fewer goods and services, resulting in a decline in its value. Therefore, as the general level of prices rises, the value of each unit of money decreases.

The Value (Purchasing Power) of Each Unit of Money