HYPERINFLATION

About:

• Meaning:
  • Inflation refers to the rise of prices of goods and services. Hyperinflation occurs when inflation increases very rapidly.
    
    
  • to most economists, hyperinflation situation occurs when the monthly inflation rate exceeds 50%, or if prices on goods increase by half in just one month's time.
    
    
  
  
  
• Cause:
  • It occurs when there is a significant increase in the money supply not supported by economic growth. It is generally associated with economic depression and wars.
    
    
  • Hyperinflation starts when a country's government begins printing excessive money to pay for its spending.
    
    
  
  
  
• Effect:
  • People will tend to hoard goods — including perishables like food — because of rising prices, which in turn, can create shortages in stockpiles.
    
    
  • Savings become worthless because people know the money will be worth less tomorrow so they exchange any cash they have for any physical good they can get (whether they need it or not).
    
    
  • And because people aren't depositing their money, financial institutions and lenders may go out of business.
    
    
  • Tax revenues also fall, meaning governments can't keep up with providing basic services.
    
    
  • Printing more money becomes the only option, making the hyperinflation even worse.