Money is still useful during times of inflation because
A) it still retains the characteristic of predictability of value.
B) its opportunity cost falls as inflation rises.
C) more money can be made so people can still purchase the goods and services they want.
D) it is not a liquid asset.
Question 2
A major difference between the transactions demand for money and the precautionary demand is that the
A) transactions demand is for emergencies while the precautionary demand is for every day expenditures.
B) transactions demand involves expected expenditures while the precautionary demand involves unexpected expenditures.
C) transactions demand means that people are foregoing interest but they are not foregoing interest in the precautionary demand.
D) transactions demand leads to the purchase of assets while the precautionary demand does not.
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The Economics of Money, Banking and Financial Markets, Business School Edition