Question

a Zimbabwean woman holds a loaf of bread costing 45,000 Zimbabwe dollars in February 2006, equivalent to about 45 cents in US dollars. Zimbabwe's annual inflation jumped to 3,700 percent a few months later.

1. How is it possible that a simple loaf of bread costs Z$45,000 when it's really worth only 45 cents?

2. What problems does this phenomenon cause for Zimbabwean citizens? (Name five).

Note: This is NOT a discussion of foreign exchange. Do NOT get bogged down in different currency values, that is not the point here.

Answer 1

1. How is it possible that a simple loaf of bread costs Z$45,000 when it's really worth only 45 cents?

Answer: Zimbabwe faced hyperinflation between 2004-2009. The government printed money to pay for the war in the Congo as a result Zimbabwe faced hyperinflation, which occurs when there is a significant rise in the money supply that is not supported by the growth of gross domestic product (GDP) causing an imbalance in the supply and demand for the money. The overall result of all this severely mismanaged causes that led to food crisis, and a simple loaf of bread cost raised to Z$45,000 when it's really worth only 45 cents

2) What problems does this phenomenon cause for Zimbabwean citizens? (Name five).

Answer: The problems that Zimbabwean citizens were:

--Zimbabweans had experienced a huge food scarcity and majority of them were surviving on just one meal a day

-- Life expectancy of people declined

--Lack of investment in infrastructure or financial institutions

--Faced uncertainty over future price levels

--Caused unemployment