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WAEC Economics 2013 Question 17

Question 17

Money and Inflation

Why would an individual increase his level of consumption during inflationary periods?

  1. A.The real value of any amount saved falls over time.
  2. B.Interest rates are generally low.
  3. C.There are varieties of goods to buy.
  4. D.Wages and salaries stagnate during inflation.
Show the answer and explanation

Answer: A (The real value of any amount saved falls over time.)

Explanation

Savings lose value as prices rise, so people prefer to spend now.