Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 3: Q.7 (page 110)

Was money a better store of value in the United States in the 1950s than in the 1970s? Why or why not? In which period would you have been more willing to hold money?

Short Answer

Expert verified

Rate of inflation plays vital role in stating the value of a currency.

Step by step solution

01

Step 1. Introduction

Money is a tool that acts as a medium in economic transactions. It also serves the purpose of measure of value and store of value, and facilitates trade.

02

Step 2. Explanation

In the 1950s, the rate of inflation was comparatively lower than the in the 1970s. So, in the 1970s, inflation caused the value of cash holdings to decline. Storing value in money was harmful in the 1970s. So, money was a better store of value in the 1950s.

A person would have been more willing to hold money in the 1950s as the inflation was lower.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Why have some economists described money during a hyperinflation as a “hot potato” that is quickly passed from one person to another?

Three goods are produced in an economy by three individuals: Good Producer Apples Orchard owner Bananas Banana grower Chocolate Chocolatier If the orchard owner likes only bananas, the banana grower likes only chocolate, and the chocolatier likes only apples, will any trade between these three persons take place in a barter economy? How will introducing money into the economy benefit these three producers?

In Brazil, a country that underwent a rapid inflation before 1994, many transactions were conducted in dollars rather than in reals, the domestic currency. Why?

Which of the Federal Reserve’s measures of the monetary aggregates—M1 or M2—is composed of the most liquid assets? Which is the larger measure?

19. The table below shows hypothetical values, in billions of dollars, of different forms of money.

a. Use the table to calculate the M1 and M2 money supplies for each year, as well as the growth rates of the M1 and M2 money supplies from the previous year.

b. Why are the growth rates of M1 and M2 so different? Explain.


2019202020212022
Currency880895900906
Money market mutual fund shares680685683692
Saving account deposits5,5005,7805,9686,105
Money market deposit accounts1,2141,2451,2741,329
Demand and checkable deposits1,000972980993
Small denomination time deposits8408711,1331,576
Traveler's check5543
3-month treasury bills1,9862,3742,4362,502
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free