Hyperinflation

Source: Khan Academy

We understand what high inflation is. But what about hyperinflation? Is it inflation on steriods? Well, actually no. They are different. Hyperinflation is actually triggered due to loss of confidence in a currency by the masses. This stems from the belief that the perceived value or purchasing power of a currency is falling rapidly. As such, everyone spends the currency quickly the minute they receive it. This causes more units of currency to be available in the market to chase after goods and services that are not able to increase as fast as the rate of available currencies. Prices of goods and services will naturally skyrocket. Notable cases of hyperinflation are the Weimar hyperinflation in the 1920s and the Zimbabwe hyperinflation as recent as 2008.

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