A Rising Rate of Inflation

question 22

Multiple Choice

A rising rate of inflation:

• A)makes people more willing to hold money as an asset.
• B)reduces the usefulness of money as a store of value and thus increases the velocity of money.
• C)increases the usefulness of money as a medium of exchange and thus reduces the velocity of money.
• D)is usually preceded by a reduction in the money supply.
• E)does not have any effect on the velocity of money.

---

Definitions:

Net Present Value

A valuation method that calculates the present value of an investment's expected cash inflows and outflows, used to assess its profitability.

Initial Cash Outlay

This refers to the amount of money initially invested or spent to start a project or investment.

Market Value

The current price at which assets, securities, or a company can be bought or sold on the open market, reflecting the perceived value by investors.

Flotation Costs

The costs incurred by a company when issuing new securities, including fees such as underwriting fees, legal fees, and registration fees.