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In economics, ”’hyperinflation”’ is very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, often the US Dollar. Prices typically remain stable in terms of other relatively stable currencies. Among famous examples of hyperinflation is one that occurred in Germany from January 1922 to November 1923. As per estimates, average price levels went up by a factor of 20 billion. Price levels kept on increasing twice once in 28 hours.
Monetary inflation occurring at a very high rate.
economics A very high rate of Inflation.
Hyperinflation is the extremely rapid escalation of prices (typically more than 50% per month) for goods and services.
The term hyperinflation, in economics, refers to extremely rapid inflation. The condition of hyper-inflation is characterized by a rapid increase in prices of goods and services as the currency of the particular place continues to lose its value.
The boundary between inflation and hyperinflation is not clearly defined. Different economists have varied opinions about the application of the term. However, economists of recent years use the term hyper-inflation for situations when the general price level increases at rates higher than 50% per month.
While inflation is calculated on the basis of a longer duration, generally a year, hyper-inflation is calculated on the basis of a much shorter time period, usually on a monthly basis.
The most famous hyperinflation of the modern era occurred in Germany in 1920-1923 when the government began printing money to make up for revenue lost to a general strike. The German hyperinflation resulted in a percentage increase in prices in the millions per month. Other cases of hyperinflation (Greece, Hungary) following World War II were even more extreme. The root cause of hyperinflation tends to be the excessive printing of currency by the monetary authority. Hyperinflation is extremely disruptive by making savings worthless very quickly, thus encouraging workers to spend money as fast as it is earned. Even moderate inflation is feared because of its potential to lead to hyperinflation, but many countries have experienced moderate inflation without hyperinflation resulting.
Following are some of the concepts related to hyperinflation:
Hyperinflation occurs in a war when a currency is not expected to keep its value after the war has come to a close. As a result of this sellers ask for risk premiums in order to accept the particular currency. This also results in rising prices of goods and services.
Hyperinflation occurs at times of depression when the amount of increase in money supply is more than the Gross Domestic Product of the same country. This reduces any balance between demand and supply of money. This results in a decrease in a currency’s value and rises in prices.
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This glossary post was last updated: 2nd April, 2020 | 0 Views.