All else equal, expectations of higher inflation will affect the amount of money people are holding because they will need more cash to pay for goods and services.

Question

Quizplus · Accepted Answer

When people expect higher inflation, they anticipate that the prices of goods and services will rise, which means they will need more money to make the same purchases. As a result, people may choose to hold more cash or other liquid assets to compensate for the anticipated increase in prices.

All Else Equal, Expectations of Higher Inflation Will Affect the Amount