It is not surprising to learn that, during hyperinflations, the demand for real money balances:
A) accelerates because people need to hold more money to cover higher prices.
B) remains constant because we are talking about real, not nominal, balances.
C) decreases, as the value of the nominal money decreases.
D) is unpredictable.

Question

Quizplus · Accepted Answer

During hyperinflations, the value of nominal money decreases rapidly, causing people to lose confidence in their currency. As a result, people tend to hold less money and instead spend the money quickly to purchase goods and services before prices rise again. Therefore, the demand for real money balances decreases during hyperinflations.

It Is Not Surprising to Learn That, During Hyperinflations, the Demand