If there seems to be a high raise in the price level even though the increase is unchecked is called hyper inflation It is reported per day or may be reported per week or per month. However, it is somehow reported through some media or through someone. Inflation may seem simple to understand and also feel you have a fantastic understanding of Inflation but in most cases, we are wrong. If it’s a commerce or economics student, they have a great opinion about Inflation and deflation but for others, it is just a question mark. They have to know what inflation is. Why we read more news about Inflation? Why dollar rate is increasing or decreasing, they must know. One rupee value is equal to fifty rupees in Sri Lanka. Why it is so? We must ask ourselves. India is a developing country, if a fantastico prime minister who has great knowledge about economics is appointed to our country, our future generations will have a brighter future. Hyperinflation states that Inflation is out of control. The statement is indeed true. The value of one dollar yesterday, today and tomorrow! Now I hope everyone has a basic understanding of inflation. The rate of increase in price is also high. It is that simple.
One fine example of Hyperinflations is that on July 1946, Hungary experienced it and in the same year, Hungarian National Bank issued 10 quintillion pengo note which is nothing but number one followed by nineteen zeroes. Hyper Inflation was at peak in Germany too from the year 1922 to 1923, they posted a posted stamps with the value of one billion marks. It also doubled every two days. Yugo Slovakia also faced Hyperinflation in October 1, 1993 and also on January 24, 1995.
Impact of Hyper Inflation is due to any one of the following.
Large debt of the government
In order to avoid debt, the government prints money. This is one of the primary cause for decreasing in the value of money. The people are expecting more salary than expected because of this. They usually demand it by way of public strike.
The government faces difficulty in handling money which might cause recession as a result..
Bank interest rate is higher than inflation rates. If you keep the money in savings account in banks, you will be saved. Inflation rates will not worry you. But if you didn’t keep, it is a cause of worry. When inflation rates are high, the interest rate is lower than that, people who saved in banks will feel their money is wasted. In a modern economy, interest rates are usually higher than the inflation rate.
Menu costs are costs in which each minute, each second, the value of price for product, say drinking coffee from a shop fluctuates. It increases most of the time. So after getting the salaries, in olden days, people will go directly to buy something useful like grocery items immediately without wasting a nanosecond. This was the case especially in Germany.
The impact of inflation may cause suspicions, people may doubt even the bankers have wrong intentions of using their money for selfish purposes. They don’t trust them that easily.
The standard of living of people will become poor, the companies will not invest their money, thus leading to slow economic growth.