Question

Explain some of the costs of hyperinflation, If they are so costly to an economy why do they occur?

Answer 1

• Hyperinflation is a situation when there is excessive inflation in the economy.
• inflation refers to the general rise in the price of goods and services in a country within a specific period of time.
• The mostly cost that is lead to hyperinflation is the slow growth in inflation rate and that reach to the peak in the long run, which totally destroys the economy.
• The rise in the price of goods can be from 1 % to 500%
• The general rise of goods and service meaning people struggle for even buying basic needs like food, water, clothes, etc.

1. They are performed in a situation when an economy is facing a crisis and in that situation the government focus on printing more and more money.
2. the printing in more money is a relief for some time but in the long run, it causes the price of general goods and services to lower and supply decrease, which means less supply and inflation in the long run.

• For example, Zimbave hyperinflation situation when it becomes an independent Country.
• Sometimes it a need which causes more money in the short run but disastrous in the long run.