Answer to Question #18227 in Economics of Enterprise for edralin

Question

Parents are putting savings for their child’s college education in a bank savings account would be affected by fairly rapid inflation?

Answer 1

Inflation - increases in most nominal prices - is a vital macroeconomic issue. Rapid inflation obscures the meaning of nominal prices,
making even simple exchanges confusing and uncertain. Although some inflation
has been of concern for decades, Americans have fortunately only rarely
experienced the severe galloping inflation that has plagued other countries.
So banks will retain savings, if their set percentage of deposits exceeds the current rate of increase in prices. This difference should be not less than the level of adaptive inflation expectations, as many deposits remain in the bank for some time. Then the percentage would be able to protect savings from depreciation and facilitate the inflow of deposits.If the state tries to minimize the loss of population from rapid inflation, it is necessary to provide citizens with the opportunity to free investment savings in stocks or real estate.