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.
You might also like to view...
Air pollution is a problem because
A) people are greedy. B) people are not environmentally conscious. C) people make use of air without having to bear all the costs of their actions. D) a market economy does not provide as strong an incentive for environmental cleanup as a socialist economy.
When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline