Question
Can you help me with these questions? Read the excerpt from the article and answer the questions: Hyperinflation in effect destroys purchasing power and encourages
Can you help me with these questions?
Read the excerpt from the article and answer the questions:
"Hyperinflation in effect destroys purchasing power and encourages hoarding of goods, as people and businesses anticipate further price increases. Periods of hyperinflation tend therefore to be self-perpetuating, as shortages further drive-up prices. Lack of certainty over prices removes the incentive for buyers and sellers. The Times reports that restaurant owners in Venezuela no longer have menus with printed prices, while supermarkets have also removed prices from shelves. Many people use cards to buy goods rather than cash.
Hyperinflation removes the certainty that a paycheck will be enough to meet living requirements, as prices rise to erode the value of wages. People can be forced to collect their wages in suitcases, although online bank accounts mean this is less of an issue than in the past. Aware of this problem, some Venezuelan companies have started offering unusual compensation packages, such as bonuses paid in eggs. Foreign currencies, retaining their stability, can also be used. As of late 2016, one roll of toilet paper cost 2.6 million bolivar, one kilo of cheese cost 7.5 million bolivar, and a chicken cost 14.6 million bolivar."
20. Explain why hyperinflation encourages the "hoarding of goods".
21. The article suggests that restaurants and markets have avoided paying "menu costs" by no longer posting prices. What other "costs" might arise when businesses don't post prices.
22. Explain why a worker in Venezuela might prefer being paid in eggs rather than in bolivars.
23. Predict what most likely happens to investment spending when there is hyperinflation. Explain.
24. Regarding hyperinflation in Venezuela, the economist Steve Hanke said, "the one thing that must be done immediately is to establish stability. Whoever does that will be a national hero." Identify one specific policy that could help establish price stability in Venezuela. Explain your reasoning.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started