Running Head: MACROECONOMICS 1

Macroeconomics (Hyperinflation)

Name

Course Title

Course Code

Date
MACROECONOMICS 2

According to Carmody (2019), the prices of goods and services reflects both their

production cost and the value of a country’s currency. In the case where a country’s currency

loses value against the another country’s currency that the goods and services are sold in, this

consequently leads to the prices of these goods and services going up. For instance, as of 2018,

the official foreign rate of exchange in Venezuela was reported to be about 250,000 bolívares to

one United States dollar. As of 2014, over 90% of Venezuela’s export earnings came from oil.

The bolívar as well as the prosperity of the country’s economy was highly reliant on oil exports.

Therefore, the global drop of oil prices in 2014 consequently led to radical drop of the foreign

demand for Venezuela’s bolívar to buy the country’s oil. This and other factors such as poor

economic strategies caused a crisis of the Venezuelan economy. Failure to control the rising

inflation rates ultimately led to hyperinflation.

The article What caused hyperinflation in Venezuela: a rare blend of public ineptitude

and private enterprise by Carmody explores hyperinflation in Venezuela and the role the

government played in causing this situation. The article explains the role 2014 drop in oil prices

played in hyperinflation in Venezuela. Moreover, besides drop in oil prices, the article outlines

other factors that caused hyperinflation in Venezuala, consequently exacerbating issues linked to

poverty in Venezuela. Some of these factors include ineffective economic strategies and the

corruption within the government body. The article points at communism inadequacy and how it

can ultimately lead a country into mass poverty. According to the article, a communist

government is extremely susceptible to corruption as demonstrated in the case in Venezuela. The

article also outlines several impacts of hyperinflation including human displacement caused by

people fleeing the country as a result of shortages of everything.

MACROECONOMICS 3

References

Carmody, M. (2019). What caused hyperinflation in Venezuela: a rare blend of public ineptitude

and private enterprise. Academic rigour, journalistic flair. Retrieved from:

https://theconversation.com/what-caused-hyperinflation-in-venezuela-a-rare-blend-of-

public-ineptitude-and-private-enterprise-102483