Question 32
Money and InflationWhich of the following is true about the value of money?
- A.It varies inversely with the price level
- B.It varies directly with the price level
- C.It depreciates in the period of deflation
- D.It is not affected by the price level.
Show the answer and explanation
Answer: A (It varies inversely with the price level)
Explanation
When prices rise, each naira buys less, so the value of money moves in the opposite direction to the price level.