For individuals who are holding money or fixed dollar value assets, inflation has the effect of:
A)improving their ability to purchase goods and services with those dollars.
B)reducing their ability to purchase goods and services with those dollars.
C)increasing the purchasing power of those dollars.
D)demonstrating the interest rate effect.

Question

For individuals who are holding money or fixed dollar value assets, inflation has the effect of:
A)​improving their ability to purchase goods and services with those dollars.
B)​reducing their ability to purchase goods and services with those dollars.
C)​increasing the purchasing power of those dollars.
D)​demonstrating the interest rate effect.

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money, meaning that the same amount of money can buy fewer goods and services due to the increase in prices. Therefore, individuals who are holding money or fixed dollar value assets will experience a reduction in their ability to purchase goods and services with those dollars.

For Individuals Who Are Holding Money or Fixed Dollar Value