The time value of money explains money's varying worth over time, while its role as a stable store of value is essential for maintaining purchasing power despite inflation.
The time value of money is the principle that a certain amount of money today has a different buying power (value) than the same currency amount of money in the future. This concept considers the impact of interest earned and inflation, highlighting the importance of money in both present and future scenarios.
Money serves as a store of value by retaining its worth over time, despite potential fluctuations in purchasing power due to inflation. Holding money allows individuals to maintain its value for future use, showcasing its role as a reliable store of value in an economy.
Despite [tex]$1 always being worth $[/tex]1, the real value of money can fluctuate based on price changes. Inflation can erode the buying power of money, emphasizing the significance of money retaining its value to fulfill its function effectively.
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