Inflation affects money by

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money over time, which limits its ability to preserve value as a store of value. For example, if inflation is 2%, then $100 today will only be worth $98 in terms of purchasing power next year. This discourages people from holding onto money for long periods of time, and forces them to invest or spend it more quickly. Inflation does not increase money's efficiency as a medium of exchange, reduce the supply of money, or reduce transactions and search costs.

Inflation Affects Money by