How does a rising rate of inflation influence the functions of money and the velocity of money?
A) Rising inflation makes people more willing to hold money as an asset, thus increasing the velocity of money.
B) Rising inflation reduces the usefulness of money as a store of value, thus increasing the velocity of money.
C) Rising inflation increases the usefulness of money as a medium of exchange, thus reducing the velocity of money.
D) Rising inflation reduces the usefulness of money as a store of value, thus reducing the velocity of money.

Question

How does a rising rate of inflation influence the functions of money and the velocity of money?  
A) Rising inflation makes people more willing to hold money as an asset, thus increasing the velocity of money. 
B) Rising inflation reduces the usefulness of money as a store of value, thus increasing the velocity of money. 
C) Rising inflation increases the usefulness of money as a medium of exchange, thus reducing the velocity of money. 
D) Rising inflation reduces the usefulness of money as a store of value, thus reducing the velocity of money.

Quizplus · Accepted Answer

Rising inflation diminishes money's effectiveness as a store of value because the purchasing power of money decreases over time with higher inflation. This situation encourages individuals to spend or invest their money more quickly rather than holding onto it, thereby increasing the velocity of money.

How Does a Rising Rate of Inflation Influence the Functions