Many of the transition economies have experienced problems with inflation because:

Question

Quizplus · Accepted Answer

Under central planning, prices were set by the government and often kept artificially low. This led to a situation where the supply of goods and services could not keep up with the demand, resulting in shortages. When transition to a market economy occurs prices are liberalized, and prices adjust to market levels, causing the prices to rise rapidly which results in inflation.

Many of the Transition Economies Have Experienced Problems with Inflation