WAEC Economics 2011 Paper

Concept:The value of money is its purchasing power, which changes inversely with the price level.Explanation:Suppose an apple cost $P$ last year.This year it costs $2P$, because the price is twice last year's price.If a person has $X$ amount of money, last year they could buy $\frac{X}{P}$ apples.This year, with the same amount of money, they can buy only $\frac{X}{2P}$ apples, which is exactly half the previous quantity.Thus, the same money now buys fewer goods than before.So the purchasing power of money has decreased.Therefore, the value of money is falling.Answer:B. falling