If there is a shortage of money in the economy, then : A. The purchasing power of money will tend to fail B. The prices will tend to rise C. The economy will fall into a recession D. The real money supply (m/p) will increase

If there is a shortage of money in the economy, then : A. The purchasing power of money will tend to fail B. The prices will tend to rise C. The economy will fall into a recession D. The real money supply (m/p) will increase

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 1QR

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Question

If there is a shortage of money in the economy, then :

A. The purchasing power of money will tend to fail

B. The prices will tend to rise

C. The economy will fall into a recession

D. The real money supply (m/p) will increase

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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