Money becomes a very poor store of value in a period of _______

1. Analyze the question The question asks when money performs poorly as a store of value. A store of value means you can keep money today and still buy the same amount of goods and services later.

2. Explain the concept Money has four main functions:

• Medium of exchange
• Unit of account
• Standard of deferred payment
• Store of value

For money to be a good store of value, its purchasing power must stay stable over time.

3. Work through the options

• A. Harvest: This is a period of abundant farm produce. Prices of food may fall, but it does not damage money's value in general.
• B. Deflation: Prices fall over time, so money buys more later. Money actually becomes a better store of value here.
• C. Recession: This is a fall in economic activity, with falling output and rising unemployment. It does not directly erode money's purchasing power.
• D. Inflation: This is a persistent rise in the general price level. Each naira buys fewer goods than before, so money kept today loses value. This makes money a very poor store of value.

4. Answer The correct option is D. Inflation.

5. Tip Link the words: Inflation = money inflates in quantity, but shrinks in value. If a question asks about the store of value function being weakened, think "rising prices", which means inflation. Remember too that the opposite (deflation) strengthens money's purchasing power.