Answer:
Inflation; decrease.
Explanation:
An inflation can be defined as the sustained or persistent rise in the prices of goods and services at a specific period of time. Also, an inflation hedge refers to the investment that are used to protect the eroding purchasing power of a currency (money) as a result of a persistent increase in price level due to inflation.
During inflationary periods, assets such as TIPS, gold, and real estate are used as inflation hedges.
Additionally, money demand will decrease when interest rates, payment technology, inflation risk, and the liquidity of other assets decrease. This simply means that, the desired holding of financial assets in the form of money (monetary value) is dependent on factors such as interest rates, inflation risk, payment technology etc.
During inflationary periods, assets such as TIPS, gold, and real estate are used as inflation hedges.
Money demand will decrease when interest rates, payment technology, inflation risk, and the liquidity of other assets increases.
Inflation is when there is a general rise in the value of money. When there is an inflation, more money would be needed to buy goods and services. As a result, the value of currency would decrease.
On the other hand, the value of commodity money increases. As a result, people would prefer to hold commodities during an inflationary period because their value is preserved. These makes commodities good inflation hedges.
When interest rate increases, there would be a decrease in the demand for money. Individuals would prefer to save their money as the interest earned on deposits would be higher.
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