1.What is meant by the value of money?

Why does the value of money fall when there is

inflation?

The value of the money is important it is purchasing power the reason why the money affect in
the inflation because when inflation increase the price of goods and service over time
effectively decreasing of the goods

2.Explain the difference between wants and demands.

Wants are desires, things without we can survive or to sustain while Demand are willing and
able to buy things that you want to buy or consume

3. What is meant by scarcity? Why does the existence of scarcity mean that we must make
choices and why will cooperation not eliminate scarcity?

Scarcity is when the means to fulfill end are limited and costly Scarcity is created directly by the
money economy thats why scarcity not elliminate to allocate the resources .

4. What are the three main motives for holding money?

The three main motives of holding money are

Transaction motive and precautionary its determined by level of income ,Speculative Motive
determined by level of interest rate

5. Consider borrowers and lenders. Who benefits and who is hurt when the rate of inflation is
less than anticipated? Explain.

Lenders are hurt by inflation because the money they get paid back has less purchasing power
than the money they loaned out. Borrowers benefit from unanticipated inflation because the
money they pay back is worth less than the money they borrowed