If two bags of rice were sold for 1,250 a month ago and two weeks later, the same amount was used to procure…

Analyze the question

A month ago, #1,250 bought 2 bags of rice. Two weeks later, the same #1,250 bought only 1 bag. We are asked what this says about the value of money.

Concept

The value of money is its purchasing power, which is the quantity of goods and services a unit of money can buy. It moves opposite to the price level:

• Prices rise → money buys less → value of money falls (inflation).
• Prices fall → money buys more → value of money rises (deflation).

Solution

• Earlier: #1,250 → 2 bags, so the price per bag = #625
• Later: #1,250 → 1 bag, so the price per bag = #1,250

The price of rice doubled, so the same amount of money now buys only half as much. Its purchasing power has fallen, so the value of money is decreasing.

Why not the others?

• A. Constant: the purchasing power changed, so this is wrong.
• B. Fluctuating: this means going up and down repeatedly. We see only one movement, a fall.
• C. Increasing: this would mean money buys more, and the opposite happened.
• D. Decreasing: correct.

Tip: In questions like this, compare how much the same money buys over time. If it buys less, the value of money is falling (inflation). If it buys more, the value is rising (deflation). Remember: prices up = money value down.