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Big bucks in zimbabwe

The image shows a photograph of Zimbabwean currency.
This bill was worth 100 billion Zimbabwean dollars when issued in 2008. There were even bills issued with a face value of 100 trillion Zimbabwean dollars. The bills had $100,000,000,000,000 written on them. Unfortunately, they were almost worthless. At one point, 621,984,228 Zimbabwean dollars were equal to one U.S. dollar. Eventually, the country abandoned its own currency and allowed foreign currency to be used for purchases. (Credit: modification of work by Samantha Marx/Flickr Creative Commons)

A $550 million loaf of bread?

If you were born within the last three decades in the United States, Canada, or many other countries in the developed world, you probably have no real experience with a high rate of inflation. Inflation is when most prices in an entire economy are rising. But there is an extreme form of inflation called hyperinflation. This occurred in Germany between 1921 and 1928, and more recently in Zimbabwe between 2008 and 2009. In November of 2008, Zimbabwe had an inflation rate of 79.6 billion percent. In contrast, in 2014, the United States had an average annual rate of inflation of 1.6%.

Zimbabwe’s inflation rate was so high it is difficult to comprehend. So, let’s put it into context. It is equivalent to price increases of 98% per day. This means that, from one day to the next, prices essentially double. What is life like in an economy afflicted with hyperinflation? Not like anything you are familiar with. Prices for commodities in Zimbabwean dollars were adjusted several times each day . There was no desire to hold on to currency since it lost value by the minute. The people there spent a great deal of time getting rid of any cash they acquired by purchasing whatever food or other commodities they could find. At one point, a loaf of bread cost 550 million Zimbabwean dollars. Teachers were paid in the trillions a month; however this was equivalent to only one U.S. dollar a day. At its height, it took 621,984,228 Zimbabwean dollars to purchase one U.S. dollar.

Government agencies had no money to pay their workers so they started printing money to pay their bills rather than raising taxes. Rising prices caused the government to enact price controls on private businesses, which led to shortages and the emergence of black markets. In 2009, the country abandoned its currency and allowed foreign currencies to be used for purchases.

How does this happen? How can both government and the economy fail to function at the most basic level? Before we consider these extreme cases of hyperinflation, let’s first look at inflation itself.

Introduction to inflation

In this chapter, you will learn about:

  • Tracking Inflation
  • How Changes in the Cost of Living are Measured
  • How the U.S. and Other Countries Experience Inflation
  • The Confusion Over Inflation
  • Indexing and Its Limitations

Inflation is a general and ongoing rise in the level of prices in an entire economy. Inflation does not refer to a change in relative prices. A relative price change occurs when you see that the price of tuition has risen, but the price of laptops has fallen. Inflation, on the other hand, means that there is pressure for prices to rise in most markets in the economy. In addition, price increases in the supply-and-demand model were one-time events, representing a shift from a previous equilibrium to a new one. Inflation implies an ongoing rise in prices. If inflation happened for one year and then stopped—well, then it would not be inflation any more.

This chapter begins by showing how to combine prices of individual goods and services to create a measure of overall inflation. It discusses the historical and recent experience of inflation, both in the United States and in other countries around the world. Other chapters have sometimes included a note under an exhibit or a parenthetical reminder in the text saying that the numbers have been adjusted for inflation. In this chapter, it is time to show how to use inflation statistics to adjust other economic variables, so that you can tell how much of, say, the rise in GDP over different periods of time can be attributed to an actual increase in the production of goods and services and how much should be attributed to the fact that prices for most things have risen.

Inflation has consequences for people and firms throughout the economy, in their roles as lenders and borrowers, wage-earners, taxpayers, and consumers. The chapter concludes with a discussion of some imperfections and biases in the inflation statistics, and a preview of policies for fighting inflation that will be discussed in other chapters.

Questions & Answers

List and explain four factors of production
Vuyo Reply
capital labour entrepreneur natural resources
Thembi
What is supply
Ogodo Reply
when the supply decreases demand also decreases
Thembi
types of demand and the explanation
akin Reply
what is demand
akin Reply
other things remaining same if demend is increases supply is also decrease and if demend is decrease supply is also increases is called the demand
Mian
if the demand increase supply also increases
Thembi
you are wrong this is the law of demand and not the definition
Tarasum
Demand is the willingness of buy and ability to buy in a specific time period in specific place. Mian you are saying law of demand but not in proper way. you have to keep studying more. because its very basic things in Economics.
Hamza
Demand is the price of Quantity goods and services in which consumer's are willing and able to offer at a price in the market over a period of time
Umar
Demand is the quantity of goods and services that the consumer are willing and able to buy at a alternative prices over a given period of time. But mind you demand is quite different from need and want.
Tarasum
Demand can be defined as the graphical representation between price&demand
alkasim
sorry demand is nt a graphical representation between price and quantity demand but instead that is demand curve.
Ebrima
Demand is the willingness and ability of a consumer to buy a quantity of a good over a given period of time assuming all other things remain constant.
Vedaant
what is commercialization?
Doris Reply
How to talk loan for bank?
Alfred Reply
what is the meaning of gpa?
Ritisha Reply
Answer: GPA stands for Grade Point Average. It is a standard way of measuring academic achievement in the U.S. Basically, it goes as follows: Each course is given a certain number of "units" or "credits", depending on the content of the course.
Yusuf
what is small and Microbuisenes
tadesse Reply
What is fiscal policy
Dansofo
Who is the funder of Economic
Dansofo
founder , that is Adam Smith
Daniel
what is model
Daniel Reply
The wealth of Nations
Yusuf Reply
the wealth of nations, is it the first?
Umar
Yes very sure it was released in 1759
Yusuf
thank you Yusuf.
Umar
then when did he died?
Umar
17 July 1790 Born: 16 June 1723, Kirkcaldy, United Kingdom Place of death: Panmure House, Edinburgh, United Kingdom
Yusuf
1790
Yusuf
that's my today questions, thank you Yusuf it's bed time see u after.
Umar
what is fiscal policy
kemigisha Reply
what's mode?
Umar Reply
mode is the highest occurring frequency in a distribution
Bola
mode is the most commonly occurring item in a set of data.
Umar
Please, what is the difference between monopoly and monopsony?
Olaleye Reply
is there monopsony word?
Umar
I have no idea though
Umar
please, in which year Adam smith was born?
Umar
monopsony is when there's only one buyer while monopoly is when there's only one producer.
Bola
who have idea on Banter
Ibrahim
like trade by barter?
Bola
Monopoly is when there's excessively one seller and there is no entry in the market while monopsony is when there is one buyer
kemigisha
Adam smith was born in 1723
Bola
 (uncountable) Good humoured, playful, typically spontaneous conversation. verb (intransitive) To engage in banter or playful conversation. (intransitive) To play or do something amusing. (transitive) To tease mildly.
Umar
which book Adam smith published first? the first book of Adam smith pls.
Umar
wealth on nation, 1776
Daniel
what is market power and how can it affect an economy?
Gab Reply
market power:- where a firm is said to be a price setter.market power benefits the powerful at the expense of others.
Umar
Market power refers to the ability of a firm (or group of firms) to raise and maintain price above the level that would prevail under competition is referred to as market or monopoly power. The exercise of market power leads to reduced output and loss of economic welfare
Kartheek
find information about the national budget
Molahlegi
three branches of economics in which tourism is likely to figure
Makgotso Reply
What are those three branches?
IlRegno

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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