If there is an increase in the money supply that causes prices to rise and leads to inflation, what happens to money?

A) it is worth the same
B) it loses purchasing power
C) it is destroyed
D) it gains purchasing power

Respuesta :

it losses purchasing power

Answer:

B) it loses purchasing power

Explanation:

The amount of goods or services that a money can buy is called its purchasing power.  It is important because inflation decreases the amount of goods and services that we can purchase with money.

It is also known as buying power. Purchasing power affects all aspects of the economics. If there is excess decrease in purchasing power due to inflation can lead to economic crisis, that's why government frames policies to regulate country's purchasing power to keep the economy healthy.