When the Consumer Price Index increases from 100 to 120

Question

a. less money is needed to buy the same amount of goods, so the value of money falls.
b. less money is needed to buy the same amount of goods, so the value of money rises.
c. more money is needed to buy the same amount of goods, so the value of money falls.
d. more money is needed to buy the same amount of goods, so the value of money rises.

Answer 1

When the Consumer Price Index (CPI) increases from 100 to 120, it indicates that the overall price level of goods and services has increased. This means that it takes more money to purchase the same amount of goods, which implies that the value of money has fallen.

Therefore, the correct option is:

c. more money is needed to buy the same amount of goods, so the value of money falls.