Author Question: Inflation interferes with the functions of money. Which of the three functions is impaired, even ... (Read 205 times)

arivle123 · **on:** Jun 30, 2018

Inflation interferes with the functions of money. Which of the three functions is impaired, even when the inflation rate is quite low? Considering higher rates of inflation, which function is affected next?

Which function of money is the last to suffer substantial damage from inflation?

Question 2

A shift in the LM curve to the left could be caused by

a. an increase in the price level.
b. a decrease in the money supply.
c. an increase in the precautionary demand for money.
d. all of the above.
e. none of the above.

meltdown117 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A consequence of even low inflation is to undermine money's function as a store of value. At somewhat higher rates, inflation complicates the use of money as a unit of account, because of increased variability of relative prices. As the inflation rate goes higher, money loses its ability to serve as a medium of exchange.

Answer to Question 2

D