How do high rates of inflation lead to an increased frequency of cash withdrawals from an ATM or a bank?
High rates of inflation erode the value of a currency, which means that people will want to hold less currency. Higher inflation rates lead to higher nominal interest rates, which may induce more individuals to put money in the bank rather than allowing it to depreciate in their pockets. This might involve going to the ATM once a week rather than twice a month.
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Money illusion is
A) when people think they are better off when their income increases even though prices have increased by the same amount. B) when people are motivated by self-interest. C) could not exist if the economy did not have competitive markets. D) a basic condition that all classical economists assume people have.
The income-expenditure model focuses on changes in price levels
Indicate whether the statement is true or false
Suppose a particular production process results in a large amount of pollution and the government decides to impose a tax to correct for this externality, such that the socially optimal output will be produced. The tax will have the effect of shifting the
A. marginal private benefit curve to the right. B. marginal social benefit curve to the right. C. marginal private cost curve to the left. D. marginal social cost curve to the left. E. marginal private cost curve to the right.
Budget deficits contribute to higher debt.
Answer the following statement true (T) or false (F)