Inflation has an adverse effect on your savings because ____________.
I.it erodes the purchasing power of the dollars you have saved
II.it increases the real rate of return on the dollars you save
III.unless sheltered,it increases the taxes owed on investment income

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of the dollars you have saved, making them worth less in the future than they are today. This means that your savings may not be able to cover the same expenses in the future as they do now. Additionally, unless sheltered, inflation can increase the taxes owed on investment income. However, inflation does not increase the real rate of return on the dollars you save, as stated in option II, as it actually reduces the real value of your savings.

Inflation Has an Adverse Effect on Your Savings Because ____________