Which of the following might cause the real value of money to rise in an economy?

• A. A rise in black market activity for essential goods
• B. A decrease in the general price level (deflation)
• C. The imposition of a price floor above equilibrium price
• D. An increase in the supply of money without a corresponding increase in goods and services

Answer: (B)

Verified step by step guidance

1. Understand that the real value of money refers to the purchasing power of money, which depends inversely on the general price level in the economy.
2. Recall that if the general price level decreases (deflation), each unit of money can buy more goods and services, so the real value of money rises.
3. Analyze the effect of a rise in black market activity: this usually reflects inefficiencies or shortages but does not directly increase the real value of money.
4. Consider the imposition of a price floor above equilibrium price: this typically causes surpluses and market distortions but does not increase the real value of money.
5. Examine an increase in the supply of money without a corresponding increase in goods and services: this tends to cause inflation, reducing the real value of money.