High inflation undermines money's purchasing power Steps: - Recall the four main functions of money: medium of exchange, unit of account, store of value, and standard of deferred payment. - Analyze inflation's impact: it causes prices to rise rapidly, reducing the real value of money held over time. - Evaluate each function: medium of exchange and unit of account rely on current usability, while store of value and deferred payment involve future value. - Identify the most affected: high inflation (20%) severely erodes long-term value preservation more than immediate transactional roles. Why C is correct: - Store of value means money holds purchasing power over time; inflation at 20% annually means $100 buys only about$83 worth of goods after one year, per the formula for real value: $PV = FV / (1 + i)^n$, drastically impairing this function. Why the others are wrong: - A: Medium of exchange facilitates transactions now; inflation doesn't stop people from using money for buying/selling. - B: Standard of deferred payment enables loans/contracts; high inflation affects repayment value but less directly than …