Question
Why would Canada not experience hyperinflation? Why? please help THE ROOT CAUSES OF HYPERINFLATION It's important not to confuse the symptoms of hyperinflation with the
Why would Canada not experience hyperinflation? Why? please help
THE ROOT CAUSES OF HYPERINFLATION
It's important not to confuse the symptoms of hyperinflation with the real problems that cause it. Hyperinflation itself is a symptom of the real problems. These root causes include poorly managed national finances, political instability and corruption, and excessive government borrowing. At least two of these three factors, sometimes all of them, are behind most cases of hyperinflation.
Back when there was a gold standard, or even further back when money was actually made of silver and gold, why was hyperinflation much less likely to occur? With a gold standard, as we discussed in an earlier unit, governments are severely restricted in the extent to which they can manipulate the money supply. The discipline of tying currency to actual gold reserves or to some world reserve currency such as the British pound makes it very difficult for a government to get into the depth of monetary trouble in can get into since the beginning of the 20th century.
Is it possible for high inflation or even hyperinflation to occur under the gold system? It has happened. When the Spanish conquistadores looted gold and silver from the native peoples of America such as the Aztecs and the Incas, there was such an influx of precious metals into Europe that it actually created a major surge in inflation as the money supply rapidly expanded over a very short period of time. But this was an extremely unusual situation, and a rare occurrence when money is backed by gold.
Governments essentially have three options for financing their programs. They can increase taxes, increase borrowing, or print more money. The reason printing more money is usually the most attractive is that it is hidden from the view of most citizens. But though they don't know about it, they are all impacted by this "hidden tax" (more about that in a moment). The reduction of people's purchasing power that goes along with printing money that doesn't have wealth to back it up can have a dramatic impact on their standard of living.
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