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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Recall that money serves three functions in the economy. What are those functions? How does inflation affect the ability of money to serve each of these functions?

To determine

Effect of inflation on the functions of money.

Explanation

Money has 3 main functions; it serves as follows:

  1. 1. A medium of exchange
  2. 2. A unit of account
  3. 3. A store of value

Inflation affects the functions of money in the following ways:

  1. 1. During hyperinflation, stores post-prices in terms of a more stable currency (mostly in terms of foreig...

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