The higher the prices in an economy, the:
(i) lower the purchasing power of the currency.
(ii) lower the real wealth in the economy.
(iii) higher the real wealth in an economy.
(iv) more expensive the country's exports.
A)(i), (ii), and (iv)
B)(i), (ii), (iii), and (iv)
C)(iii) and (iv)
D)(iv) only

Question

Quizplus · Accepted Answer

(i) When the prices increase, the purchasing power of the currency decreases because more units of currency are required to purchase the same goods and services.
(ii) When the prices increase, the real wealth in the economy decreases because the same amount of money can purchase fewer goods and services.
(iv) When the prices increase, the country's exports become more expensive because foreign buyers need to pay more in their own currency to purchase the same amount of goods from the country.

The Higher the Prices in an Economy, The