From 2004 to 2009 the country of Zimbabwe underwent hyperinflation, in which pri

Question

From 2004 to 2009 the country of Zimbabwe underwent hyperinflation, in which prices rise rapidly. The government began printing bills as large as 100 billion Zimbabwe dollars.

Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers.

Explain how this situation would have affected the characteristics of good money discussed in this chapter.

A)Hyperinflation makes the value of money unstable. B)Hyperinflation stabilizes the value of money. C)Hyperinflation lowers the acceptability of money. D)Hyperinflation makes money more conveient. E)Hyperinflation increases the value of money.

Explanation / Answer

The case with Zimbabwe was a special one, where hyperinflation surged to 1593 percent, a level at which 400 percent interest rate appeared relatively insignificant.

In the presence of hyperinflation, prices of goods and services rises violantly that makes the purchasing power unstable. The domestic currency become less valuable and its price falls.

Hence the correct option is A). If two answers are possible, Option C) can also be considered.

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