During hyperinflations, the velocity of money generally increases because
A) money is no longer a good store of value, so people spend it slowly.
B) money is better store of value, so people spend it immediately.
C) economic agents have irrational expectations.
D) money is no longer a good store of value, so people spend it immediately.

Question

Quizplus · Accepted Answer

During hyperinflations, the value of money decreases rapidly, so people tend not to hold onto it as a store of value. Instead, they spend it as quickly as possible before its value drops even further. This results in an increase in the velocity of money, as it is being exchanged more frequently in transactions. Therefore, option D is the correct answer.

During Hyperinflations, the Velocity of Money Generally Increases Because