Which statement about inflation and money's store of value is correct?

Which statement about inflation and money's store of value is correct?

• A. It increases purchasing power.
• B. It tends to decrease purchasing power.
• C. It has no effect.
• D. It automatically stabilizes value.

Answer: (B)

Inflation means prices rise over time, which reduces how much you can buy with a given amount of money. Because money buys less as price levels go up, its store of value erodes, meaning purchasing power tends to decrease. The other statements don’t fit: inflation doesn’t increase buying power, it does have an effect on value, and stabilizing value isn’t automatic—it requires policy actions to control inflation.

Inflation means prices rise over time, which reduces how much you can buy with a given amount of money. Because money buys less as price levels go up, its store of value erodes, meaning purchasing power tends to decrease. The other statements don’t fit: inflation doesn’t increase buying power, it does have an effect on value, and stabilizing value isn’t automatic—it requires policy actions to control inflation.