During periods of hyperinflation,money does not hold its value long enough to make everyday market purchases;therefore,people hold as little as possible for as short a time as possible.This description implies that the
A)Transactions demand for money has decreased.
B)Precautionary demand for money has increased.
C)Speculative demand for money has decreased.

Question

Quizplus · Accepted Answer

During periods of hyperinflation, people tend to spend their money as soon as possible because its value is rapidly decreasing. This reduces the transactions demand for money, as people are not holding onto it for very long before they spend it. However, the precautionary demand for money may increase, as people may want to hold onto some cash as a hedge against uncertainty and future price increases. The speculative demand for money may also decrease, as people may prefer to invest in assets that hold their value better than cash during hyperinflationary periods.

During Periods of Hyperinflation,money Does Not Hold Its Value Long