Q28.What is hyperinflation? Why did Germany experience hyperinflation?
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ANSWER
Hyperinflation is a situation when prices rise phenomenally high. This situation occurred in Germany due to several reasons:
(i) Germany had fought the First World War largely on loans and had to pay the war compensation in gold. This depleted gold reserves at a time resources were scarce.
(ii) When Germany refused to pay the war compensation, France occupied its leading industrial area, Ruhr, to claim their coal.
(iii) Germany retaliated with passive resistance and printed paper currency recklessly. With too much printed money in circulation, the value of the German Mark fell. As a result, prices of goods soared. The image of Germans carrying cartloads of currency notes to buy a loaf of bread was widely publicised. This crisis came to be known as hyperinflation.
Hyperinflation is a term to describe rapid, excessive, and out-of-control general price increases in an economy. Germany was already suffering from high levels of inflation due to the effects of the war and the increasing government debt. In order to pay the striking workers the government simply printed more money. ... This flood of money led to hyperinflation as the more money was printed, the more prices rose.
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