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What is hyperinflation and how does it affect the economy?
When the price of goods and services increases exponentially and continuously over a period of time, the economy experiences hyperinflation. During hyperinflation, prices don’t rise due to supply shortages or increased demand. They rise because the value of a country’s currency isn’t worth much.
What is meant by hyperinflation?
Hyperinflation. Hyperinflation is a term used when inflation rates exceed 50\%. This is typically caused by rapid growth of the supply of paper money. The best studied example is post-WWI Germany, where the Weimar Republic was faced with having to pay reparations from the war, as well as stimulating economic growth.
Why is hyperinflation bad?
High inflation, and by extension hyperinflation, is bad because it undermines the important benefits that money provides, and which together account for the fact that there’s a demand for money in the first place.
What does hyperinflation mean?
Hyperinflation is a term to describe rapid, excessive, and out-of-control price increases in an economy, typically at rates exceeding 50\% each month over time. Hyperinflation can occur in times of war and economic turmoil in the underlying production economy, in conjunction with a central bank printing an excessive amount of money.
Which is the best definition of hyperinflation?
Hyperinflation. In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the currency, as the prices of most or all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies.
How does hyperinflation happen?
Hyperinflation happen is the result of excessive increase of the money supply. In practice, it usually starts when a Government default on its debt obligation. In a desperate attempt to stay afloat, it starts to pay its employees by printing money and it quickly goes out of control.