Question

1. Explain what an economy should focus on to avoid hyperinflation?
2. What have you learnt about the best policy response when there is hyperinflation?

Answer 1

Hyperinflation is the worst stage of inflation. It is stage where inflation is on one side and unemployment is on other side. In this stage aggregate demand Increases and hinders the economic growth.income , output and employment cannot be increased. It is worst stage for poor section of societies

Therefore , it is essential to control hyperinflation.

Answer Contractionary fiscal and monetary policy adopted can reduce hyperinflation as money supply will reduce and aggregate demand will decrease.