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Suppose an economy produces only ice cream cones. If the price level rises, the value of currency a. falls, because one unit of currency buys fewer ice cream cones.

b. falls, because one unit of currency buys more ice cream cones.
c. rises, because one unit of currency buys fewer ice cream cones.
d. rises, because one unit of currency buys more ice cream cones

1 Answer

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Answer: falls, because one unit of currency buys fewer ice cream cones.

Explanation: An inflation would occur if the price of the ice cream cone increases, as a unit amount of money would only be able to buy a fewer amount of ice cream cone.

An inflation is the rise of price of commodities in a market which leads to a direct fall in monetary value in that economy.

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