WAEC Economics 2010 Theory — Question 19

Model answer

Inflation is a persistent rise in the general price level. When there is a rise in the general price level, the value of money falls. Therefore, with inflation, the value of money changes even though the value of the goods concerned has not changed, and money becomes a poor measure of value. Money as a store of value is affected when there is inflation because the value of the money kept as assets falls and loses its worth - it will be worth less than what was kept.