Question

On a financial television show, paz hears the announcer say that the country is currently experiencing a high inflation rate. how will this most likely affect paz’s investments?

Answer 1

Paz observes the announcer on a financial television program state that the nation is now facing a high inflation rate.

A. With the current high inflation rate, the value of Paz’s investments will possibly not grow at the same rate as the general level of inflation.

What does it indicate if the inflation rate is high?

High inflation, therefore, is when prices for interests and items is unusually high. Customers can therefore get less for their money when purchasing. Although a little inflation can be flattering, it can also hurt individual finances, counting on the circumstances.

Why is high inflation wrong for the economy?

When inflation is high, money and non-interest bearing checking accounts are avoided because they are constantly declining in purchasing power. People will use useful economic resources (including their time and "shoe leather") to scrimp on their holdings of such money balances.

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Complete question shown below,

A. With the current high inflation rate, the value of Paz’s investments will possibly not increase at the same rate as the general level of inflation.

B. This level of high inflation guarantees higher returns on Paz’s investments, making it a very safe investment.

C. If the return on Paz’s investment is growing at a slower rate than the inflation rate, her investment will increase her purchasing power.

D. If Paz’s investment is earning 2 percent interest, but the inflation rate on goods is increasing by 5 percent, she has gained about 3 percent of purchasing power.