If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.Hence when the overall price level rises, the value of money falls.

Question

Quizplus · Accepted Answer

When the overall price level rises, the value of money decreases as it can buy fewer goods and services. This is reflected by the fact that the reciprocal of the price level, 1/P, decreases.

If P Represents the Price of Goods and Services Measured