expressing price, and as a store of value.People will only accept money in exchange for goods and services and for the work they perform if they can be reasonably certain that the medium of exchange—money—will retain its value until they are ready to spend it. In runaway inflations of the thousands or tens of thousandsof percent a year, people revert to barter.Drastic inflation greatly reduces money’s use as a measure of value, for it is impossible to adjust instantaneously all prices strictly in line with their relative values. Thus, opportunities are afforded to speculators to profit at the expense of the less sophisticated who, eventually, will learn to distrust money’s usefulness as a measure of value.Finally, and most obviously, money’s usefulness as a store of value is destroyed in a drastic inflation. The “rule of 70” is instructive here. By dividing the absolute inflation rate into 70, onecan estimate how long it takes one’s dollar savings to lose half their purchasing power. At 7 percent inflation, the dollar will be worth half as much in ten years.
Question 35Not yet graded / 30 ptsWhich of the following are included in this year’s GDP? Explain your answer in each case. a. An auto dealer’s sale of a new car to a non-business customer.b. The services of a commercial painter in painting the family home.c. The money received by Smith when she sells her biology textbook to a used-book buyer.d. A $2 billion increase in business inventories.e. The publication and sale of a new economics textbook.