What are some of the costs that inflation is imposing on Zimbabweans?

Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter13: Inflation
Section: Chapter Questions
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What are some of the costs that inflation is imposing on Zimbabweans?
Expert Solution
STEP 1 (INTRODUCTION)

The term "inflation" refers to an increase in the general price level of the economy. Hyperinflation is a very high and typically increasing inflation rate, eroding the domestic currency's real value. The root cause for hyperinflation in Zimbabwe is a significant increase in the money supply above the real GDP growth rate.

STEP 2 (EXPLANATION)

The cost that the inflation rate is imposing on Zimbabweans are:

  • Individuals have to spend time in multiple time money exchanges per day.
  • The business sector can be forced to adjust price levels several times a day.
  • Application of unproductive policies such as price control.
  • Distortion of the aggregate price level, thus making planning difficult.
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