If the general price index rises while the amount of money remains unchanged, the purchasing power of money will generally:
Correct answer: B. Decrease in the same proportion
- A. Increase in the same proportion
- B. Decrease in the same proportion
- C. Remain fixed at the base value
- D. Become equal to the price index
Explanation
Purchasing power moves inversely with the price level. When prices rise, the same monetary unit buys fewer goods and services, so its purchasing power falls.
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