Question

Why is hyperinflation bad?
Why is deflation bad?
Pros and Cons of dual mandate?
Why low IR environment creates bubbles?

Answer 1

Answer to the first question has been provided :

1) Why is hyperinflation bad?

Answer : Hyperinflation refers to the situation where a country is experiencing very high and usually accelerating rates of inflation . This rapidly erodes the real value of local currency . The general price level rapidly rises causing fall of purchasing power of money . The real value of tax revenue falls over night . Business and firms are damaged . Unemployment rate rises very fast . There is economic and political imbalance in the country . The suuden loss of value of domestic currency also damages balance of trade .