DOES INFLATION,WHICH IS AN INCREASE IN THE PRICE LEVEL, AFFECT THE THREE FUNCTIONS OF MONEY? IF SO,HOW.

The three functions of money in books that I have used in
my classes are

• Medium of
  exchange


• Store of
  value


• Unit of
  account

Of these, the only one that is likely
to be seriously affected is the second one -- money as a store of
value.

If you have saved money, you hope it will be worth
at least as much in the future as it is now.  However, if there is inflation, your money
loses its value.  If you saved $100 in 1970, the year I was born (and you just kept it
under your mattress gathering no interest), it would only be worth $17.21 in today's
money, according to my favorite online inflation
calculator.

So where there is inflation, your money does
not hold its value.