Multiple Choice
Which of the following scenarios best reflects the meaning of the term 'inflation targeting'?
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11. Unemployment and Inflation
Who is Affected by Inflation?
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Inflation does the greatest harm to money's function as a(n) ____.
A
medium of exchange
B
method for barter trade
C
unit of account
D
store of value
Verified step by step guidance1
Step 1: Understand the three main functions of money: medium of exchange, unit of account, and store of value.
Step 2: Recall that 'medium of exchange' means money is used to facilitate transactions between buyers and sellers.
Step 3: Recognize that 'unit of account' means money provides a common measure for valuing goods and services, allowing prices to be compared.
Step 4: Note that 'store of value' means money can hold value over time, allowing people to save purchasing power for the future.
Step 5: Analyze how inflation affects each function: inflation causes prices to rise unpredictably, which undermines money's role as a stable unit of account, making it difficult to compare values over time.
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