In periods of high inflation,
A)people want to hold as much money as possible
B)the purchasing power of money is decreasing
C)nobody wants to work and earn income
D)low nominal interest rates are likely to result
E)nobody wants to buy goods and services

Question

Quizplus · Accepted Answer

In periods of high inflation, the purchasing power of money decreases. This means that the same amount of money can buy fewer goods and services than before. As a result, people tend to spend their money faster rather than holding onto it, which can further increase inflation. Low nominal interest rates may also result as a way to encourage borrowing and spending to help stimulate the economy during periods of high inflation. Therefore, options A, C, and E are incorrect.

In Periods of High Inflation