Tiffin University Effects of Hyperinflation on the Economy of Zimbabwe Analysis

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Introduction

In this discussion, you will apply what you have learned in Chapter 12 to real-world situations in order to see how the concepts can be applied to a very broad range of situations. While we might be able to discuss the effects of inflation on an economy and the costs a higher rate of inflation might impose on the general public, the highest inflation has been in the United States in the past 60-70 years has been about 15%. Thus, to get a much more acute example of the costs of inflation, you will examine situations in which the rate of inflation is much higher; perhaps the price level doubling in as little time as a couple of days.

Initial Post Instructions

In the relatively recent past, there have been several examples of what economists call “hyperinflation” in which the general price level increases by at least 50% in one month. Examples include periods of hyperinflation in Austria, Germany, and Hungary between the two World Wars, and most recently in Zimbabwe during the mid- to late-2000’s. Some more details can be found on the Wikipedia page for Hyperinflation (https://en.wikipedia.org/wiki/Hyperinflation#Hyperinflationary_episodes). Note: This is not a library source, but Wikipedia isn’t a bad place to get a general idea of concepts – but one should always go to the primary sources or use other, more reliable, sources for research!

In this discussion, find an article or two on the effects of hyperinflation on the economy of one of the above listed countries. You may also explore episodes of high inflation as well (some examples are also listed on the Hyperinflation Wikipedia page). Read and discuss your articles. Some questions you may answer, but you don’t have to answer all: what caused the hyperinflation? Why did the entities that caused the hyperinflation take the actions that they did? Was there a problem that needed to be solved (or an attempted solution tried)? What effects did hyperinflation have on the citizens of the country? What costs did the citizens incur because of the extreme levels of inflation? Would those costs exist with moderate (2-4%) levels of inflation? (Note: obviously the costs would not be as large in an economy with moderate inflation as compared to an economy with hyperinflation, but those costs might still exist. The reason I chose to discuss hyperinflation this week is in part because the costs of inflation may be much more apparent when there is hyperinflation as compared to when there are moderate amounts of inflation).

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