When the Value of Money Rises, What Happens to the Number

question 5

Multiple Choice

When the value of money rises, what happens to the number of dollars needed to buy a representative basket of goods?

• A) It increases, and so the price level rises.
• B) It increases, and so the price level falls.
• C) It decreases, and so the price level rises.
• D) It decreases, and so the price level falls.

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Definitions:

Indirect Business Taxes

Taxes levied on goods and services rather than on income or profits, affecting the pricing of these items.

Transfer Payments

Payments made by governments to individuals or groups without receiving any goods or services in return, often aimed at providing financial assistance or subsidies.

Nominal Gross Domestic Product (GDP)

The total worth of all end products and services created inside a country during a specified time frame, calculated in present-day prices without making revisions for inflation effects.

Base Year

A reference year against which financial or economic data is compared, often used in index numbers and economic models.