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Group 5: Models of Growth

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“Hyper inflation is both a monetary and fiscal phenomenon”

In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money. Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value. Meanwhile, the real value of economic items generally stays the same with respect to one another, and remains relatively stable in terms of foreign currencies. This includes the economic items that generally constitute the government's expenses. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.
Hyperinflation is often associated with wars, their aftermath, socio-political upheavals, or other crises that make it difficult for the government to tax the population, as a sudden and sharp decrease in tax revenue coupled with a strong effort to maintain the status quo can be a direct trigger of hyperinflation.
When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its value. When associated with wars, hyperinflation often occurs when there is a loss of confidence in a currency's ability to maintain its value in the aftermath. Because of this, sellers demand a risk premium to accept the currency, and they do this by raising their prices. One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some

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