Inflation denotes which of the following situations?
Question and options
Inflation denotes which of the following situations?
- price level rises - money value falls
- price level rises - money value rises
- price level falls - money value falls
- price level falls - money value rises
Answer and explanation
Correct answer: A - price level rises - money value falls
Inflation is a sustained rise in the general price level. Because each unit of money then buys fewer goods, the value of money falls; a falling price level, deflation, would raise the value of money instead.
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