Question

If inflation expectations increase, but the return on money doesn’t, people will want to hold less money, ceteris paribus, because the relative return on goods (land, gold, turnips) will increase.a. True b. False

Answer 1

TRUE

Explanation: If the return on money does not rise in relation to the expectation of a rise in inflation, people will have less need to keep more money with them, if other factors remain constant (ceteris paribus) the relative return on goods such as Land,gold,turnips,buildings etc and other non financial items will increase. This situation tries to show the relationship between a rise in inflation and a rise in non financial items this tries to explain the MONEY THEORY.