How Does a Rising Rate of Inflation Influence the Functions

question 93

Multiple Choice

How does a rising rate of inflation influence the functions of money and the velocity of money?  

• A) Rising inflation makes people more willing to hold money as an asset, thus increasing the velocity of money. 
• B) Rising inflation reduces the usefulness of money as a store of value, thus increasing the velocity of money. 
• C) Rising inflation increases the usefulness of money as a medium of exchange, thus reducing the velocity of money. 
• D) Rising inflation reduces the usefulness of money as a store of value, thus reducing the velocity of money.

---

Definitions:

Adjusting Process

The method of updating account balances at the end of an accounting period to reflect accurate financial positions.

Financial Statements

Financial statements are formal records of the financial activities and condition of a business, person, or other entity, providing an overview of a financial situation over a specified period.

Matching Principle

An accounting principle that requires expenses to be recorded and recognized in the same period as the revenues they helped to generate.

Expenses

Costs incurred in the normal course of business to generate revenues, including costs such as rent, salaries, and utility expenses.