As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries' central banks will try to sustain an inflation rate of 2-3%.
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.
1stnd 2nd pt explanation- This is the second worst inflation in history after Hungary in 1946 .6th point explanation - Loss of wild life leads to deforestation so loss of tourism industry .
Hyperinflation in zimbabwe part 1
A project byConnel FernandesVinayak BhosleGaurav SinghVinesh JaiswalAkshay RajputNitesh PrasadRohil SanilHyperinflation in Zimbabwe
WHAT IS INFLATION ? The rate at which the general level ofprices for goods and services is rising,and, subsequently, purchasing power isfalling. Central banks attempt to stopsevere inflation, along with severedeflation, in an attempt to keep theexcessive growth of prices to a minimum.http://www.investopedia.com/terms/i/inflation.asp#ixzz1hjMWR6FE
WHAT IS HYPERINFLATION ? Extremely rapid or out of controlinflation. There is no precise numericaldefinition to hyperinflation. Hyperinflationis a situation where the price increasesare so out of control that the concept ofinflation is meaningless.http://www.investopedia.com/terms/h/hyperinflation.asp#ixzz1hjNCku1P
CAUSES OF HYPERINFLATION INZIMBABWE Land reforms Fragmentation of land Commercial farming to community farming Loss of agricultural productivity Scarcity of food Loss in export revenue Repayment of the IMF Loan Increase of money supply Participation in DRC war Increased scarcity of food and oilwww.cato.org/zimbabwe/hyperinflation
CAUSES OF HYPERINFLATION INZIMBABWE Escalation of cost of production Price control for more than 50% of the products No incentive for production Thus, capital deccumulation Shutdown of industries Loss of confidence Escalation of unemployment Rampant black marketing Prices soar higher Further increased money supplywww.cato.org/zimbabwe/hyperinflation
Thus the above reasons leadZIMBABWE to a dangeroussituation known as
EFFECTS OFHYPERINFLATIONOnce 1 zw $ = i.59 us $ but latter on in 2008 itcame to500 billion zw $ = 2 us $Prices in Zimbabwe in November 2008 rise inevery 24.7 hoursMajor exporter of tobacco and maze became netimporter.80% of population is unemployedLife expectancy in adult in 1990 – 60 and as ofnow it is 37.60% of Zimbabwes wild life died since 2000FDI is almost nil in Zimbabwe which is the majorindicator in growth of any nation.Prices in Zimbabwe raised to 64 times from 7thth
PRESENT SITUATION INZIMBABAWEAt the time of independence there were about 1%population of whites holding 70 % of countriescommercial capitalIn 1975 there were around 296000 whites whereas in 1999 it was around 120000 and in 2002 thenumber was less than 50000At present black people make 98% of population.Government spending is 56.4% of GDP.Because of use of other stable currencies the rateof inflationhas reached almost to 0-3% ,but theconsequences of this was that now the street
MEASURES TAKEN TO CONTROLHYPERINFLATION More over in starting 2009 on 16th January govt.planned toIssue notes of greater denomination such as 10T,20T, 50T,and 100T.zw $. Zimbabwe dollar was suspended on 12 April 2009And use of more stable currency was allowed suchas us$,African rand euro . On July 30th 2008 the governor RBZ announcedthat 10Zeros will be removed from Zimbabwean dollar.