Question

As the price level rises, the value of money

a. increases, so people must hold more money to purchase goods and services.
b. increases, so people must hold less money to purchase goods and services.
c. decreases, so people must hold less money to purchase goods and services.
d. decreases, so people must hold more money to purchase goods and services.

Answer 1

When the price level rises, the value of money decreases, as a result, people must hold more money to purchase goods and services. Therefore, Option D is the correct statement.

What is the relationship between price of goods & money?

When the price degree rises money should purchase much fewer items and services. So, here the buying power has fallen.

Conversely, whilst the price falls, money should purchase greater and we are able to say its purchasing power has long gone up. Thus, the value of money adjustments is inversely related to the price degree.

Therefore,  When the price level rises, the value of money decreases, as a result, people must hold more money to purchase goods and services. Option D is the correct statement.

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