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NEW QUESTION: 1
A period of inflation:
A. Harms anyone who has an obligation to pay a specific amount and benefits anyone who is entitled to
receive a specific amount.
B. Increases the price level, which benefits those who are entitled to receive specific amounts of money.
C. Increases the price level, which is negatively related to the purchasing power of money.
D. Enhances the positive relationship between the price level and the purchasing power of money.
Choice "d" is correct. A period of inflation increases the price level, which is negatively related to the
purchasing power of money (inflation erodes the value of money).
Choice "a" is incorrect. When price levels increase, those with fixed amounts of money are hurt.
Choice "b" is incorrect. The relationship between price levels and the purchasing power of money is
negative, or inverse.
Choice "c" is incorrect. Inflation helps anyone with a fixed obligation since the debt can be repaid in
inflated dollars. Those receiving a specific fixed amount are harmed.
NEW QUESTION: 2
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