Question

Inflation causes dollar denominated assets like cash and savings accounts to lose their real value.

Answer 1

inflation means sustained/constant increase in the general price level of goods and services in an economy over a period of time.

  Inflation reduces the purchasing power of each unit of nation's currency, which leads to increases in the prices of goods and services over time. Simply,it increases our cost of living and reduces our purchasing capacity.

  As the price rises, a single unit of currency (let's assume- cash )loses it's value as it buys fewer goods and services than before. This loss of purchasing power impacts the general cost of living for the common public . It encourages spending/investing instead of saving; as cash and savings only lose value.The impact of inflation has on the time value of money is that it decreases the value of a dollar over time; which simultaneously affect our cash in hand and savings account.

So,inflation causes dollar denominated assets like cash and saving accounts to lose their real value.