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A rise in prices (i.e. inflation) will lead to money becoming even more valuable as a...


A rise in prices (i.e. inflation) will lead to money becoming even more valuable as a store of value. Why is this statement false? Provide for a brief example proving your case.
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Answer #2

The effect that inflation has on the value of money is that it reduces the value of money over time.

for example: Suppose that the price of 2 gold coins is 10$. We know after some years the price of gold increases due to inflation.So after some years because of inflation a person can buy only 1 gold coin of 10$. Suppose there are two buyers say John and Jack. John buys 2 gold coins of 10$ and Jack doesn't buy. Jack buys after some years but he has to pay 10$ only to buy 1 gold coin due to inflation.

So as the price increases due to inflation the value of money decreases .

answered by: anonymous
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