Question

What occurs over time as a result of inflation? Check all that apply.

Interest becomes worth less money.
The dollar’s value becomes unstable.
Interest rates decrease.
Interest rates fluctuate in value.
The dollar’s future value changes.

Answer 1

Select:
- Interest becomes worth less money. (True — inflation reduces the real value/purchasing power of interest payments.)
- Interest rates fluctuate in value. (True — inflation and monetary policy cause interest rates to change over time.)
- The dollar’s future value changes. (True — inflation erodes the dollar’s future purchasing power.)

Do not select:
- The dollar’s value becomes unstable. (Not necessarily — inflation reduces purchasing power but isn’t always “unstable.”)
- Interest rates decrease. (False — inflation typically puts upward pressure on nominal rates, not a guaranteed decrease.)