Value of money????

Question

can you please explain how an increase in the price level affects the real value of money.

Answer 1

Increase in prices leads to a lower value of money.

The real value of money is how much you can buy with your money.  If oranges cost $1 today and $2 tomorrow, $4 can buy fewer oranges the second day.  Thus, the value of your money has diminished.

The same effect applies to a general increase in prices as well.

Answer 2

It's the other way around . When the value of paper money falls prices go up . Look at Zimbabwe now or Germany before WW2 .

Answer 3

The increase in the value of items means the overall price of money can decrease, sounds strange i know but if the price of something increases then more money is printed and more money is given out which means the overall value decreases because there is so much more of it in circulation.

Dont quote me on this but i think it may have been in soviet russia during the second world war where everything because so over inflated that a loaf of bread became worth millions.

Currently with the price of metal going up coins like the 1p are actualy costing 1.2p to make! and then the treasury sells these coins to the government so they are making a loss on what they are producing.

But then why doesnt money become worthless if we are printing more all the time? This is because money is removed from circulation from time to time, banks take out the damaged note and replace them with new ones so the amount of money stays in circulation the whole time.

originally the amount of money had to be back with gold ina federal reserve but i think that has changed since then...