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

Question

Quizplus · Accepted Answer

In periods of high inflation, people are hesitant to hold onto cash because its purchasing power will decrease over time. As a result, banks need to offer higher nominal interest rates to incentivize people to save money rather than spend it. Therefore, high nominal interest rates are likely to result during periods of high inflation.

In Periods of High Inflation