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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.

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