ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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high tax rates that discourage work effort
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continuous expansion of the money supply to finance government budget deficits
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trade surpluses that are caused by strong protections policies
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bad harvests that lead to widespread shortages
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Detailed explanation-1: -Hyperinflation commonly occurs when there is a significant rise in money supply that is not supported by economic growth. The increase in money supply is often caused by a government printing and injecting more money into the domestic economy or to cover budget deficits.
Detailed explanation-2: -The two primary causes of hyperinflation are (1) an increase in money supply not supported by economic growth, which increases inflation, and (2) a demand-pull inflation, in which demand outstrips supply. These two causes are clearly linked since both overload the demand side of the supply/demand equation.
Detailed explanation-3: -Hyperinflation is a term used when inflation rates exceed 50%. This is typically caused by rapid growth of the supply of paper money. The best studied example is post-WWI Germany, where the Weimar Republic was faced with having to pay reparations from the war, as well as stimulating economic growth.
Detailed explanation-4: -In order to pay the striking workers the government simply printed more money. This flood of money led to hyperinflation as the more money was printed, the more prices rose. Prices ran out of control, for example a loaf of bread, which cost 250 marks in January 1923, had risen to 200, 000 million marks in November 1923.
Detailed explanation-5: -higher supply of money. demand-pull inflation. cost-push inflation.