Qwhen money decreases in value because of inflation people

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Q. When money decreases in value because of inflation, people tend to place less trust in it as a method of storing value, and look for alternative means of storing their wealth that would be more efficient. Hyperinflation (extremely high inflation that can range from 100% to 10,000% annually) makes money particularly unstable. In fact, hyperinflation makes money meaningless. That is what happened in Germany during the 1920s. A pack of cigarettes, for example, had a price tag of 200 trillion marks. As a result, people ceased to use the official, but worthless, currency and resorted to using other objects as money (such as clothes, appliances, jewelry, antiques, diamonds, silver, and gold). These objects effectively became money. Subsequently, the German economy collapsed, setting the stage for the rise of Nazism. Other countries have experienced recent hyperinflation (Bolivia in 1984 and Yugoslavia in 1994).

Illustrate why did official money lose its meaning in Germany during the 1920s? What did the German government do or not do?

Do you believe that the United States could be facing a hyperinflation problem in the near future? Why or why not?

Explain how can we deal with hyperinflation?

Reference no: EM13354256

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