Question

The rule of 70 (which provides an estimate of the amount of time it will take for some variable, like money holdings to double) can show us how during a drastic inflation

a. money’s usefulness as a store of value is destroyed.

b. the relative value of products falls as inflation continues.

c. the relative value of products change.

d. the amount of money in everyone's bank accounts will double.

Answer 1

Answer) There are 2 important concepts in this question,first is rule of 70,second is drastic inflation,rule of 70 implies that you can use number 70 for telling in how many years something will double,so if GDP of country is growing at 7% per annum,it will take roughly 70/7=10 years for GDP to double,however if there is inflation,rule of 70 tells in how many years the opposite effect will be there that is money will be halved,now drastic inflation is something close to 40-50% atleast,if it is hyperinflation,it could be well above 100%!,so let us take 50% inflation here,then it will take 70/50=1.4 years roughly for your money to get halved,if its 70% inflation,it will only take a year,now hat does it imply,it implies during drastic inflation rule of 70 can shows us how quickly value of our money or how its usefulness will get destroyed,which is reflected in option a) money's usefulness as a store of value is destroyed and is correct option,so option a) money's usefulness as a store of value is destroyed is correct.

Answer is complete.Thank you!