Inflation halves money's purchasing power

Steps:

• Inflation measures the percentage increase in the general price level over a year.
• A 100% inflation rate means the price level exactly doubles.
• Purchasing power equals the quantity of goods and services money can buy.
• Doubling prices means each unit of money buys half as much, halving purchasing power.

Why C is correct:

• Purchasing power is inversely proportional to the price level; the formula PP = 1 / Price Level Index shows that a 100% price increase (doubling) halves PP.

Why the others are wrong:

• A: Money supply doubling isn't required; inflation depends on money supply growth relative to output and velocity, per quantity theory of money.
• B: 100% inflation doubles the price level, it does not halve it.
• D: Real value of money is purchasing power, which halves, not doubles.

Final answer: C