Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 7, Problem 15E
To determine
The effect of hyperinflation on the currency and benefits of using a low-inflation currency as a substitute for a high-inflation currency.
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Suppose there are 1200 units of money on an island, but money grows by 5.32% per year. Islanders spend each unit of money 2.3 times per year on average and this spending grows by 1.98%. The price level is at 34. GDP is expected to grow at 4.83%. What is the level of inflation? Answer this as a percentage without the percentage sign and round this to two digits after the decimal. ex. If you found the rate to be 5.125%, answer 5.13.
Discuss what caused hyperinflation in Zimbabwe and if you think this could happen in The United States.
Distinguish between the general inflation rate and the average inflation rate for specific goods?
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