Asked by tehseen malik on Jul 19, 2024
Verified
Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?
Money-Supply Growth Rate
The rate at which the amount of money available in an economy grows, impacting inflation and economic activity.
Hyperinflations
denotes extremely high and typically accelerating inflation rates, often resulting in the rapid erosion of the real value of the local currency.
- Describe methods by which hyperinflations have been ended historically.
Verified Answer
RN
Ragavy NirmalanJul 26, 2024
Final Answer :
Typically, the government in countries that had hyperinflation started with high spending, inadequate tax revenue, and limited ability to borrow. Therefore, they turned to the printing presses to pay their bills. Massive and continued increases in the quantity of money led to hyperinflation, which ended when the governments instituted fiscal reforms eliminating the need for the inflation tax and subsequently slowed money supply growth.
Learning Objectives
- Describe methods by which hyperinflations have been ended historically.
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