A rising rate of inflation
A)makes people more willing to hold money as an asset
B)reduces the usefulness of money as a store of value and thus increases the velocity of money
C)increases the usefulness of money as a medium of exchange and thus reduces the velocity of money
D)is usually preceded by a reduction in the money supply
E)does not,apparently,have any effect on the velocity of money

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money, making it less useful as a store of value. As a result, people may try to spend their money quickly before it loses even more value, and thus the velocity of money increases.

A Rising Rate of Inflation