Asked by Steven Gudiel on May 25, 2024
Verified
Suppose a burger costs $6. Molly holds $60. What is the real value of the money she holds?
A) $16.If the price of burgers rises, to maintain the real value of her money holdings she needs to hold more dollars.
B) $50.If the price of burgers rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
C) 10 burgers.If the price of burgers rises, to maintain the real value of her money holdings she needs to hold more dollars.
D) 50 burgers.If the price of burgers rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
Real Value
Reflects the purchasing power of an amount of money, considering inflation, and contrasts with nominal value, which does not take inflation into account.
Money Holdings
The quantity of money an individual or entity holds as a store of value and medium of exchange.
- Understand the concept of real value of money and how it changes with prices.
Verified Answer
KH
Kennedi HandbergMay 28, 2024
Final Answer :
C
Explanation :
The real value of Molly's money is best represented by how many burgers she can buy with it, which is 10 burgers ($60 / $6 per burger). This measure remains useful regardless of nominal price changes, as it reflects purchasing power.
Learning Objectives
- Understand the concept of real value of money and how it changes with prices.