Which of the following causes 'hyperinflation'?
A)A shortage of credit, similar to that which occurred during the 2007-2009 global financial crisis.
B)A central bank policy of high interest rates.
C)Government budget surpluses leading to an increase in government spending.
D)Central bank activity which increases financial liquidity at a much greater rate than the growth rate of real GDP.

Question

Quizplus · Accepted Answer

Hyperinflation is caused by excessive growth in the money supply, which may be due to central bank activity that increases financial liquidity at a much greater rate than the growth rate of real GDP. A shortage of credit (A) or a central bank policy of high interest rates (B) would typically have the opposite effect of reducing the money supply and controlling inflation. Government budget surpluses (C) may lead to an increase in government spending, but this alone is not sufficient to cause hyperinflation.

Which of the Following Causes 'Hyperinflation