Which of the following is likely to occur in a period of high inflation?
A) People will want to hold as much money as possible.
B) The purchasing power of money will increase.
C) No one will want to work and earn income.
D) Nominal interest rates will be high.

Question

Which of the following is likely to occur in a period of high inflation?  
A) People will want to hold as much money as possible. 
B) The purchasing power of money will increase. 
C) No one will want to work and earn income. 
D) Nominal interest rates will be high.

Quizplus · Accepted Answer

In periods of high inflation, nominal interest rates tend to be high in order to compensate for the loss of purchasing power of money over time. A) People are less likely to want to hold money as its purchasing power decreases rapidly. B) The purchasing power of money decreases during periods of high inflation, not increases. C) This statement is inaccurate and not related to high inflation.

Which of the Following Is Likely to Occur in a Period