The purchasing power or value of money
A) is determined by law.
B) varies inversely with the price level.
C) depends on the value of gold.
D) varies inversely with the interest rate.

Question

Quizplus · Accepted Answer

The purchasing power or value of money varies inversely with the price level. This means that as prices increase, the purchasing power of money decreases and vice versa. This relationship is explained by the concept of inflation, where an increase in the general price level reduces the amount of goods and services that can be purchased with a given amount of money. The other choices, A, C, and D, are not accurate as they do not fully explain the determinants of the purchasing power or value of money.

The Purchasing Power or Value of Money