Asked by Prabhjot Bansal on Jun 30, 2024
Verified
Which of the following assets decreases the most in purchasing power during inflation?
A) Government bonds
B) Real estate
C) Savings account money
D) Cash
Purchasing Power
The financial ability to buy goods and services; it reflects the value of money in terms of the quantity of goods or services that one unit of money can buy.
Government Bonds
Debt securities issued by a government to support government spending and obligations.
Savings Account
A bank account where people can deposit money to earn interest over time, with fewer withdrawal facilities.
- Recognize how inflation affects purchasing power and the real value of money.
Verified Answer
AK
Anastacia KuzminaJul 05, 2024
Final Answer :
D
Explanation :
Cash decreases the most in purchasing power during inflation because its value is directly tied to its purchasing power. As inflation rises, the prices of goods and services increase, which means that the purchasing power of cash decreases. This is why it is important to invest cash in assets that can keep up with inflation, such as stocks or real estate, instead of holding onto it in a savings account or as physical cash.
Learning Objectives
- Recognize how inflation affects purchasing power and the real value of money.