When an economy experiences volatile and unpredictable hyperinflation:
A) people will decrease their borrowing.
B) people will increase their lending.
C) borrowing and lending won't be affected.
D) it causes a breakdown of financial intermediation.

Question

Quizplus · Accepted Answer

Hyperinflation causes people to lose faith in the currency, leading to a breakdown in financial intermediation. This means that lending and borrowing will become nearly impossible as banks and other financial institutions will be hesitant to provide loans in a highly inflationary environment. Therefore, option D is the correct choice.

When an Economy Experiences Volatile and Unpredictable Hyperinflation