Real life examples about Macroeconomic problems

Research about countries which have experienced inflation or

unemployment. You need to find out the consequences of that and what
steps the Government has taken to solve this problem. You need to
provide the information in detail.

Venezuela

Venezuela has been facing economic and political instability for years

causing more than 5 million of the citizens to migrate from the country

since 2014.Venezuela has been facing hyperinflation,violence,food and

medicine shortages.Hyperinflation is when there is rapid and excess

increase in general prices in an economy.Few causes causes of

hyperinflation are increase in money supply and demand pull inflation.

So what caused hyperinflation in Venezuela?

Former President Hugo Chávez had instituted price controls for food
and medicine. But mandated prices were so low it forced domestic
companies out of business. In response, the government paid for
imports. In 2014, oil prices plummeted, eroding revenues to the
government-owned oil companies as oil is More than 90% of the
country’s export earnings When the government ran out of cash, it
started printing more which caused the money supply to increase in the
economy.When the citizens saw this happen they lost confidence in
venezuela's currency and started to purchase a more stable currency like
dollars which further decreased the value of bolivar.
The government tried to get on top of this situation by issuing a
currency devaluation. Maduro devalued the bolívar by 95%, the largest
currency devaluation in world history. Devaluation is the deliberate
downward adjustment of the value of a country's currency relative to
another currency. He also tied the new currency to the price of oil, an
economic experiment designed to show the Venezuelan economy had
solid foundations.

By bringing the bolívar’s value into line with the reality of what people
actually thought it was worth, and showing it was backed by something
valuable, oil, Maduro’s government hoped Venezuelans would believe in
their own currency and not exchange it for dollars. This would help
stabilise the economy overall.But within weeks of the devaluation it was
clear ordinary Venezuelans had not been convinced.

They had no reason to be as given the fact that the government was not
addressing other issues, such as policies contributing to low productivity
across the economy.Hyperinflation is a very difficult hole out of which to
climb. Very few economies ever experience it, and it’s hard to stop it
without massively cutting government spending.

As of 2019, Venezuela’s foreign debt is about $100 billion. The annual

inflation rate for consumer prices was at 15,000% percent in early 2020.
With the continued collapse of its economy, the country is facing a
monumental problem of debt repayment.
ZIMBABWE

On nov 2008, Zimbabwe had inflation rate was 79,600,000,000%

The daily inflation rate was 98.0 so almost every day the average prices levels
were doubling.The was a rise in poverty and unemployment rates of close to
80% . Hyper-inflation was caused by printing money in response to a series of
economic shocks the country faced for example-high national debt,decline in
GDP,trade deficit etc.
The government tried to resolve using economic measure price controls.Price
control is when the government caps the price of goods and services in an
economy.Due to price controls the shortage of supply was made worse as the
price for basic goods were kept very low to make them more affordable. But
this measure increased the cost of production faster than prices, suppliers had
little incentive to supply the goods. This made the shortage worse and the
actual inflation worse.The government eventually stopped printing Zimbabwe
dollars and normalised the practice of using the US dollar as most citizens had
already exchanged their currency for us dollars and now Us dollars is the
official currency which is used to purchase goods and services in Zimbabwe.

Bibliography

○ Carmody, Michelle. "What Caused Hyperinflation in Venezuela: a Rare Blend of Public

Ineptitude and Private Enterprise." The Conversation, 5 Feb. 2019,

theconversation.com/what-caused-hyperinflation-in-venezuela-a-rare-blend-of-public-inepti

tude-and-private-enterprise-102483.

○ Pettinger, Tejvan. "Hyper Inflation in Zimbabwe." Economics Help, 11 Sept. 2020,

www.economicshelp.org/blog/390/inflation/hyper-inflation-in-zimbabwe/.

○ "Venezuela Crisis: Facts, FAQs, and How to Help." World Vision, 23 June 2020,

www.worldvision.org/disaster-relief-news-stories/venezuela-crisis-facts.