Hyperinflation can best be stopped if a government
A)reforms its budget process, introduces new money, and pegs the exchange rate of the new money to that of a stable foreign currency
B)imposes wage-price controls but lets money supply grow at high levels for a prolonged time to accommodate the high demand for money
C)is replaced by another government more friendly towards industrial nations so more foreign aid can be obtained
D)implements supply-side policies in an effort to simultaneously reduce the rates of inflation and unemployment
E)gradually reduces money supply growth so a large increase in unemployment can be avoided

Question

Quizplus · Accepted Answer

Hyperinflation can be best stopped by implementing measures that strengthen the budget process, introduce a new stable currency, and peg its exchange rate to a stable foreign currency. This can help in stabilizing prices, reducing inflationary expectations, and restoring confidence in the economy. Imposing wage-price controls or letting money supply grow at high levels can worsen the situation in the long run, while replacing the government may not be feasible or effective. Supply-side policies may help in reducing inflation and unemployment, but may take time to yield results. Gradually reducing money supply growth can also help, but may result in some level of unemployment in the short run.

Hyperinflation Can Best Be Stopped If a Government