SUBMITTED TO

TAHSIN BINTE ANIS

LECTURER
School of business
Canadian University of Bangladesh

SUBMITTED BY
Labib Ibne Raisul
ID: 17303045
COURSE TITLE
INTRODUCTION TO MACROECONOMICS
COURSE CODE
ECO-102
SPRING ’20

SUBMISSION DATE
09/06/20
INTRODUCTION TO HYPER INFLATION

Hyper Inflation is rapid and exorbitant increase of price in an

economy. And it cannot be good for an economy. It substantially
affects a countries economy. It occurs when the inflammation rate
exceeds more than 50% for a period of one month. Obviously when
inflation is too high it is bad for the economy or individual

Hyper inflations cause the following in a country:

• Reduces the value of money,

• Shuts down businesses
• Increases living cost
• Increase in unemployment rate
• Reduces competitiveness
There are two main causes of hyper inflation -

• Increase In Money Supply

This happens when a country's government begins printing

money to pay for its spending. As it increases the money supply,
prices rise as in regular inflation.

2. Demand Pull Inflation

This occurs when a surge in demand outstrips supply, sending

prices higher. This can happen due to increased consumer
spending due to a growing economy, a sudden rise in exports, or
more government spending.

When prices of the food or basic item increases people starts hoarding
items and this in turn creates shortages of products in the market. The
shortage affects the supply and increases prices further.

Increase in price = Shortage in supply = Further increase in price

Zimbabwe , Africa and Venezuela suffered from hyper inflation because
these countries started printing more moneys to try make their
economies grow. Since they kept on printing money, the prices of
product increased very fast. This was the reason for hyper inflation in
this countries. In this country’s the value of the currency eroded very
fast which affected the economy in a negative way. The price of
products kept on going higher which reduced competitiveness in the
market which in term led to low consumer demand.

Below is a chart for Zimbabwe

Hyperinflation also happens during war or times of epidemic and

pandemic. Such as the pandemic we are facing right now.
Coronavirus has spread across the globe. It has affected the economy in
the worst way. Businesses have shut down and are trying to stay a float.
People are only buying masks and sanitizer are the world.

Inflation in the wealthiest countries has collapsed at the fastest pace

since the financial crisis in 2008, as the coronavirus outbreak sinks the
world into the deepest recession for almost a century.

For instance, sudden disruption in economic activities forced about 40

million people out of work in the USA. Unemployment rate has jumped
to 14.7 per cent in April and it might go up to 20 per cent around June.
Economists are worried that the recovery would be slow given the fact
that the pandemic has remained intractable. They also conclude that the
economy will shrink by 4.5 per cent this year.

For this, countries like USA, CANADA, UK has released a stimulus

package for businesses to prop up the economy. This packages range
from providing more funds for healthcare services to income support
measures to loans for the affected businesses at easy terms.
As the corona pandemic created both demand and supply shocks,
governments have resorted to a policy-mix that includes fiscal, monetary
and sectoral measures.