Question

Which of the following statements is true regarding purchasing power?

• A. It is the value of a currency in terms of the amount of goods or services that one unit of money can buy.
• B. It is the total value of all goods and services produced in a country.
• C. It is the rise in general price levels in an economy.
• D. It is the amount of money the citizens of a country keep in their wallets or handbags.

Answer 1

The correct option is A It is the value of a currency in terms of the amount of goods or services that one unit of money can buy.

Purchasing power refers to the value of a currency in terms of the amount of goods or services that one unit of money can buy. The total money value of all goods and services produced in a country in a period of time is called national income. The increase in general price levels in an economy refers to inflation.