Question

Which behavior is encouraged by a high rate of inflation ?

banks provide lower interest rates


governments establish a welfare system


people spend money instead of saving it


businesses choose to decrease production

Answer 1

people spend money instead of saving it

Step-by-step explanation:

Inflation decreases the purchasing power of a given currency. When inflation looms, people tend to buy and stock up those necessary things that their value is perceived to remain relatively the same. Some of these things can range from food and groceries, to fuel for cars and power. Some other commodities like gold and equities can be invested in, to maintain the value of the money spent on them over time. People will rather spend their money than save when inflation strikes because the value of the money saved now will decrease in the future due to inflation, so inflation creates a spending frenzy, and people will rather spend their money than save it.

Answer 2

people spend money instead of saving it

Step-by-step explanation:

Inflation decreases the purchasing power of a given currency. When inflation looms, people tend to buy and stock up those necessary things that their value is perceived to remain relatively the same. Some of these things can range from food and groceries, to fuel for cars and power. Some other commodities like gold and equities can be invested in, to maintain the value of the money spent on them over time. People will rather spend their money than save when inflation strikes because the value of the money saved now will decrease in the future due to inflation, so inflation creates a spending frenzy, and people will rather spend their money than save it.