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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Does inflation, which is an increase in the price level, affect the three functions of money? If so, how?

To determine

Identify how the inflation affects the functions of money.

Explanation

An inflation is a state of increase in the general price level. The impact of inflation on the three functions of money is listed below:

  • Medium of exchange: Money act as a medium of exchange to pay for the goods and service. When the general price level increases, people will demand more money to meet the day-to-day expenses.
  • Unit of account: As a unit of account, money is used to measure the value of goods and services in an economy...

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