Multiple choice

Value of money is

  1. independent of the price level

  2. directly related to the price level

  3. inversely related to the price level

  4. cannot be determined

  5. None of these

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The value of money is inversely related to the price level. When prices rise (inflation), each unit of money buys less - its value falls. When prices fall (deflation), each unit buys more - its value rises.