Question

Inflationary rise in prices ____________.

• A. Reduces rate of saving
• B. Has no effect at all on savings
• C. Does not affect normal expenses
• D. Increases savings

Answer 1

The correct option is A Reduces rate of saving

Inflationary rise in prices refers to a rise in the general price level in the economy. The rise in prices will lead to higher proportion of the income being spent by the people on consumption. This would thus lead to a decrease in the rate of savings when the income remains unchanged.