Which of the following statements is correct about the value of money?
i. It is directly related to the price level.
ii. It is not related to the price level.
iii. It is indirectly related to the price level.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Only iii is correct.
- The correct statement is (iii). The value of money is indirectly or inversely related to the price level. When the price level rises, each unit of currency buys fewer goods and services, meaning the value of money decreases. Conversely, when the price level falls, the value of money increases.