Hyperinflations typically occur when governments:

Question

Quizplus · Accepted Answer

Hyperinflations occur when governments finance spending with the inflation tax, which involves printing money to pay for expenditures. This leads to an increase in the money supply and a decrease in the value of the currency, causing prices to skyrocket. This is different from setting high inflation targets or using discretionary monetary policy to stabilize output, which may have unintended consequences but will not necessarily lead to hyperinflation. Keeping unemployment below the natural rate may also contribute to inflation, but it is not the primary cause of hyperinflation.

Hyperinflations Typically Occur When Governments