The purchasing power of the dollar
A) varies directly with the price of gold.
B) varies directly with interest rates.
C) varies directly with the price level.
D) varies inversely with the price level.

Question

Quizplus · Accepted Answer

The purchasing power of the dollar varies inversely with the price level. This means that as the price level increases, the purchasing power of the dollar decreases, and vice versa. This is because when prices rise, it takes more dollars to purchase the same goods and services, reducing the overall value of each dollar.

The Purchasing Power of the Dollar