Hyperinflation occurs when the government runs a large budget _____, which the central bank finances with a substantial monetary _____. a. surplus; expansion b. deficit; contraction c. surplus; contraction d. deficit; expansion
Added by Alvaro H.
Close
Step 1
It is usually caused by a combination of factors, including a large budget deficit, a substantial monetary expansion, and a loss of confidence in the currency. Show more…
Show all steps
Your feedback will help us improve your experience
Brooke Bussoletti and 60 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
When the economy weakens, what generally happens in terms of government budget deficits? A. Government budgets become balanced B. Governement budget deficits increase C. Government budget surpluses become larger D. Government deficits turn into surpluses
Brooke B.
If a nation has high and persistent inflation, the most likely explanation is a. the central bank creating excessive amounts of money. b. unions bargaining for excessively high wages. c. the government imposing excessive levels of taxation. d. firms using their monopoly power to enforce excessive price hikes.
An article in the Economist notes that the government of Venezuela running a large budget deficit "caused the money supply almost to quadruple in two years and led to the world's highest inflation rate, of over 60$\%$ a year." a. Why would running a large budget deficit cause the money supply in Venezuela to increase so rapidly? b. If the money supply increased by 150 percent per year (or 300 percent over two years) while the inflation rate was 60 percent, what must have happened to velocity in Venezuela during this period?
Money, Banks, and the Federal Reserve System
The Quantity Theory of Money
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD