7. Problems and Applications Q7

Money serves three functions in the economy: medium of exchange, unit of account, and store of value.

Which of the following statements describes how inflation affects the ability of money to serve as a store of value?Check all that apply.

Inflation causes menu costs.

Inflation erodes money's purchasing power.

In some countries with hyperinflation, prices are posted in terms of U.S. dollars rather than the local currency, even though the local currency is still used to purchase the good.