Which of the following are true of severe inflation? Multiple select question. Severe inflation is defined as inflation exceeding 300 percent over a ten-year period. Severe inflation is defined as inflation exceeding 100 percent over a three-year period. In cases of operations located in highly inflationary economies, the U.S. dollar should be used as the foreign entity's functional currency. The volatility of hyperinflationary currencies distorts the financial statements if the local currency is used as the foreign entity's functional currency. Need help? Review these concept resources