Asked by Jacob Liscinsky on May 07, 2024
Verified
The purchasing power of a dollar will rise
A) if nominal interest rates rise.
B) if the price level decreases.
C) if the price level increases.
D) if real interest rates fall.
Purchasing Power
A measure of the value of currency, expressed in terms of the quantity of goods or services that one unit of money can buy.
Nominal Interest Rates
The rate of interest before adjustments for inflation, reflecting the price of borrowing money.
Price Level
A metric that calculates the mean of present prices for all goods and services produced within the economy, relative to a reference year.
- Understand the factors that influence the purchasing power of money.
Verified Answer
AB
amanpreet bhinderMay 09, 2024
Final Answer :
B
Explanation :
The purchasing power of a dollar is determined by the price level, so if the price level decreases, the purchasing power of a dollar will rise. Nominal interest rates, real interest rates, and increases in price level all have an ambiguous effect on the purchasing power of a dollar.
Learning Objectives
- Understand the factors that influence the purchasing power of money.