Which function of money is directly affected by inflation brainly? (2024)

Which function of money is directly affected by inflation brainly?

The function of money that is directly affected by inflation is the store of value.

Which function of money is directly affected by inflation?

Answer and Explanation:

Store of value is one of the functions of money. Money can be used as a store of value because we can use the today's money in future. But in case of inflation, the real value of money decreases.

Which of the following functions of money would be more difficult to achieve if inflation were high?

The correct answer is: b.

In the cases of high inflation (hyperinflation), people are reluctant to hold money as a store of value, and instead, they spend it on assets and other goods. Therefore, in the case of high inflation rates, the function of money as a store of value is violated.

What is money as a measure of value?

Money as a measure of value, helps in determining the value of goods and services in the economy. Money is taken as the common denominator while measuring the value of goods and services in the economy. Therefore, with the help of this function everything can be measure in a common denominator or unit.

How does money act as a store of value?

Store of value is an asset that can retain its purchasing power into the future and can be retrieved to be used again at a later time. Money has a store of value because it is an asset that can be invested, stored in a bank, left in a safe at home, and then later used to purchase something in the future.

Why does inflation affect money?

Inflation reduces real returns on financial investments and erodes your purchasing power. In other words, your investments may be worth less when you need to use them. Inflation can affect different kinds of financial instruments differently.

What happens to money in inflation?

As prices increase, purchasing power (or the value of currency) consequently decreases. And when inflation “surges,” it means that each unit of currency today is worth less than it was just a few months ago. Even if you make zero changes to your lifestyle or everyday purchases, the amount you spend will be higher.

Which function of money is most seriously affected during a period of severe inflation?

Inflation Erodes Purchasing Power

This is inflation's primary and most pervasive effect. An overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption.

What are the three basic functions of money describe how high rates of inflation can impact money's ability to perform each of the three functions?

Answer and Explanation:

Firstly, it serves as a medium of exchange . Secondly, money is a store of value. Thirdly, money must serve as a unit of account. Hyperinflation undermines the ability of money to perform these three basic functions.

Which form of money is more susceptible to inflation?

Changes in public confidence in a government issuing fiat money may be enough to make the fiat currency worthless. Commodity money, however, retains value based on the metal or other material content it has. Fiat money is therefore more at risk of inflation because its value is not intrinsic.

What are the 4 main functions of money?

The Four Basic Functions of Money

Money serves four basic functions: it is a unit of account, it's a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.

What are the two functions of money?

Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money's most important function is as a medium of exchange to facilitate transactions.

What are the three functions of money?

To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange. Modern economies use fiat money-money that is neither a commodity nor represented or "backed" by a commodity.

What makes money valuable?

Summary. Currency value is determined by aggregate supply and demand. Supply and demand are influenced by a number of factors, including interest rates, inflation, capital flow, and money supply. The most common method to value currency is through exchange rates.

Which characteristics of money is the most important one and why?

Stability. Of all the qualities of good money, stability is probably the most essential one. The value of money cannot change for a long period of time and hence remain stable. If the value of money keeps changing, then it will fail to function as a measure of value and as a standard of deferred payment.

What is the main disadvantage of using money as a store of value?

If value is stored as money, then the value can decrease over time, writes Forbes. This is especially so when compared to other stores of value, such as stocks or real estate, which can keep pace with inflation by increasing in price. The rate of inflation can vary, so this disadvantage can change over time.

Does inflation hurt the rich or poor more?

Prior research suggests that inflation hits low-income households hardest for several reasons. They spend more of their income on necessities such as food, gas and rent—categories with greater-than-average inflation rates—leaving few ways to reduce spending .

Does inflation hurt the rich?

“In terms of household well-being, inflation is a net boon to the middle class. The top 1% of the wealth distribution also gains handsomely from inflation. On the other hand, poor households (the bottom two quintiles in terms of wealth) get clobbered by inflation,” he wrote.

Will prices go back down?

"Deflation, economists... they would not really look kindly on falling prices, and actually, prices are far unlikely to go back to those pre-pandemic levels," Foster said. So, while inflation has indeed slowed since 2021, we're probably not going back to 2019 prices.

Who does inflation hurt the most?

Inflation hurts poor people and those on fixed incomes the most. Inflation helps borrowers and investors in stocks, real estate, and commodities.

What are two reasons why a person would want to save money?

Who controls the money supply?

Just as Congress and the president control fiscal policy, the Federal Reserve System dominates monetary policy, the control of the supply and cost of money.

Where does inflation hit the hardest?

Is inflation a function of money?

Inflation is a function of the supply and demand for money, meaning that producing relatively more dollars causes each dollar to become less valuable, forcing the general price level to rise.

What are the 3 negative effects of inflation on an economy?