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Is it good to save money in the bank during prolonged inflation?
Wiki User
∙ 13y ago
Saving money is always good irrespective of the economic situation. But during periods of prolonged inflation, the value of money goes down. If we don't invest the money into instruments that earn us a good interest on our money, the value of the money we have comes down. Since bank savings accounts offer only small or meager interest rates, it is a better idea to invest the money in other high yield instruments rather than leave them in the bank during high inflation periods.
From an economist's standpoint, the concept of inflation means that money today has more purchasing power than the same amount of money does tomorrow. For example, if you have 1% inflation per year, that means that it will take $101 next year to purchase something that costs $100 today.
In general, savings are a good idea, from an economist's point of view, for a variety of reasons. However, during a prolonged period of HIGH inflation, it is unlikely that the money you save in a bank would retain sufficient purchasing power to counteract the overall decline in its worth (that is, the interest you earn on your bank savings would be much smaller than the rate of inflation). Thus, it is better to purchase something with that money NOW, than save it for the future. Not only would you gain the use of the thing right now, but if the thing is a durable good (or property, or the like), then you can sell it in the future and retain much of your purchasing power.
An example: in certain countries in the 1970s and 1980s, inflation ran at over 100% per month. So, if I had $100 today, it could only buy something currently worth $50 next month, and something currently worth $25 the month afterward. That is, the "purchasing power" of my $100 is cut in half each month I hold onto the money. Thus, it is a better economic strategy to purchase something Right Now with the money, and sell it in the future when you need to become liquid again. Thus, instead of "saving" in a bank, you "save" by buying physical things, and then sell those physical things when you need to get cash.
Wiki User
∙ 13y ago
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What is a sharp or sudden rise in prices resulting from an increase in paper money or bank credit?
Inflation.
What is asharp and sudden rise in price resulting from an excessive excessive expansion in paper money or bank groups?
Inflation.
Why does the central bank of the Philippines poes not make money so that the Philippines will not need to borrow money for education from the World Bank?
One word. Inflation. Printing more money causes prices to rise because of it's abundance.
A sharp sudden rise in prices resulting from an excessive expansion in paper money or bank credit?
It's called inflation. Get ready for a lot of it.
Which of the following groups benefits from unanticipated inflation?
It depends on the situation. Say I put $10,000 in a savings account at 2.5% a year. The expected rate of inflation is 2% so my money is gaining value. However if there's say 3% my money is losing value and the bank benefits because they're paying under the inflation rate.
Is it advisable if you deposit to a bank during inflation?
yes
What is a sharp or sudden rise in prices resulting from an increase in paper money or bank credit?
Inflation.
A sharp and sudden rise in prices resulting from an expansion in paper money or bank credit?
inflation
A sharp and sudden rise in prices resulting from from an excessive expansion in paper money or bank credit?
inflation
A sharp and sudden rise in prices resulting from an excessive expansion in paper money or bank credit?
This is a definition of inflation. If the rise in prices is both rapid and very large, it is called hyperinflation.
What is asharp and sudden rise in price resulting from an excessive excessive expansion in paper money or bank groups?
Inflation.
Why does the central bank of the Philippines poes not make money so that the Philippines will not need to borrow money for education from the World Bank?
One word. Inflation. Printing more money causes prices to rise because of it's abundance.
A sharp and sudden rise in prices resulting from an excessive expation in paper money or bank credit?
It's called inflation.
Which among the following measure of controlling inflation can be taken up byReserve Bank of India and not by Government of India?
I).Monetary Measures The most important and commonly used method to control inflation is monetary policy of the Central Bank. Most central banks use high interest rates as the traditional way to fight or prevent inflation. Monetary measures used to control inflation include: (i) bank rate policy (ii) cash reserve ratio and (iii) open market operations. Bank rate policy is used as the main instrument of monetary control during the period of inflation. When the central bank raises the bank rate, it is said to have adopted a dear money policy. The increase in bank rate increases the cost of borrowing which reduces commercial banks borrowing from the central bank. Consequently, the flow of money from the commercial banks to the public gets reduced. Therefore, inflation is controlled to the extent it is caused by the bank credit. Cash Reserve Ratio (CRR) : To control inflation, the central bank raises the CRR which reduces the lending capacity of the commercial banks. Consequently, flow of money from commercial banks to public decreases. In the process, it halts the rise in prices to the extent it is caused by banks credits to the public. Open Market Operations: Open market operations refer to sale and purchase of government securities and bonds by the central bank. To control inflation, central bank sells the government securities to the public through the banks. This results in transfer of a part of bank deposits to central bank account and reduces credit creation capacity of the commercial banks
Why was Alexander Hamilton's plan for a national bank was politically significant?
Alexander Hamilton's plan for a national bank was politically significant because the bank made the money in the country standardized. There was one place producing and controlling the money which kept inflation controlled.
Why does the state bank of Pakistan issue treasury bills?
State bank of Pakistan issus T-bills for the in-take of money
What happens during a bank run-?
customers attempt to withdraw more money than the bank has on hand
