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3. Hyperinflation isinflation that is veryhigh or "out
ofcontrol", a conditionin which pricesincrease rapidly.usually more
than50% a month.
4. History of Hyperinflation In 1922, inflation in Austria
reached 1426%, in January 1923, the consumer price index rose by a
factor of 11836, with the highest banknote in denominations of
500,000 krones. Germany went through its worst inflation in 1923.
In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1
US dollar. In 1923, the rate of inflation hit 3.25 106 percent per
month (prices double every two
5. Hungary went through the worst inflation ever recorded
between the end of 1945 and July 1946. It is the most severe known
incident of inflation recorded, peaking at 1.3 1016 percent per
month (prices double every 15 hours). The Republic of China went
through the worst inflation 194849. Peak Month and Rate of
Inflation: Apr. 5070%
6. Hyperinflation in Zimbabwe was one of the few instances that
resulted in the abandonment of the local currency. Hyperinflation
began early in the 21st- century,in 2004, reaching 624%. At its
Nov. 2008, peak monthly rate was 79.6 billion percent, which is
equivalent to around 710108 percent yearly rate. At that rate,
prices were doubling every 24.7
7. $100 Trillion
8. Causes High inflation must always be preceded by major
increases in the supply of money. Imbalance between supply and
demand for the specific currency. The reduction of the value of the
paper money. Increased borrowing in order to pay of other
debt.
9. The role of civil war, revolution, or deep social/political
unrest is the factor in many of the hyperinflation. The existence
of weak govt. is another important condition that triggers
hyperinflation. Loss of confidence in the countrys economy(the
first step into hyperinflation).
10. Effects The prices of goods go higher, especially the
prices of commodities. Creates an environment for consumption and
spending, but NOT investment and saving. International investors
will not invest in the countrys economy (lacks FDI). People prefer
to keep their wealth in non-monetary assets or in a relatively
stable foreign currency.
11. Zimbabwe Paper Money Used asToilet Paper
12. Decrease in public purchasing power. Currency debasement
(which lowers the value of a currency, and sometimes cause a new
currency to be born. People tend to barter instead of using money
as a way of exchanging goods.
13. How it can be controlledThere are broadly two ways of
controlling hyperinflationin an economy:I).Monetary MeasuresThe
most important and commonly used method tocontrol inflation is
monetary policy of the Central Bank.Most central banks use high
interest rates as thetraditional way to fight or prevent
inflation.Monetary measures used to control
hyperinflationinclude:(i) bank rate policy(ii) cash reserve ratio
and(iii) open market operations.
14. 2). Fiscal measuresFiscal measures to control hyper
inflation includetaxation, government expenditure and
publicborrowings. The government can also take someprotectionist
measures (such as banning the exportof essential items such as
pulses, cereals and oilsto support the domestic consumption,
encourageimports by lowering duties on import items etc.).
15. Prevention Increase the interest rate dramatically. Cutting
government spending and debt. Increasing reserve rates for banks.
But each of these steps might have their own side effects in the
economy.