By early 2009, Zimbabwe was experiencing inflation that was estimated to be 231 million percent per year. Because of the rapidly falling value of paper money, the government was forced to issue currency in larger and larger denominations, including a $50 billion note. At the time, a $50 billion note would purchase about two loaves of bread. An economist in Zimbabwe was quoted as saying, “It is a waste of resources to print Zimbabwe dollar notes now. Who accepts a currency that loses value by almost 100 percent daily?”
a. Why would printing notes be a waste of resources?
b. The government of Zimbabwe authorized many stores to make transactions in foreign currencies. What difficulties would this cause stores and consumers?