An increase in the purchasing power of money need not lead to an increase in the purchasing power of income because the falling price level would likely mean falling wages and salaries.

Question

Quizplus · Accepted Answer

If the price level falls, it may lead to falling wages and salaries as businesses may reduce their costs to compete. Therefore, even though the purchasing power of money has increased, the purchasing power of income may decrease.

An Increase in the Purchasing Power of Money Need Not