38. Money is an imperfect store of value when a. the rate of inflation is high. b. the unemployment rate is high. c. gold prices are falling. d. businesses are failing due to bankruptcy.

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Business

Lillian Compton

25 January, 18:06

38. Money is an imperfect store of value when a. the rate of inflation is high. b. the unemployment rate is high. c. gold prices are falling. d. businesses are failing due to bankruptcy.

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Answers (1)

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Sanaa Moon · Answer 1

a. the rate of inflation is high

Explanation:

When the inflation rate is high money loses its value because inflation rates decrease people's purchasing power which means that because of inflation they will be able to buy less goods and services with the same amount of money because goods and services cost more. For example if Person A has a million dollars and he can buy 5 houses from that in 2015, if Person A keeps his money in a bank as a store of value and there is 20% inflation it means that now 5 houses will cost 20% more (1.2*1 million) = 1.2 million. And Person A has now lost value as he will not be able to buy the same amount of houses with the same amount of money because of inflation.