Hyperinflation typically leads to:
A) a preference for domestic over foreign currency.
B) a decrease in real money balances.
C) a decrease in barter.
D) a more efficient transactions system.
E) an increase in real tax revenues collected by the government.

Question

Quizplus · Accepted Answer

Hyperinflation reduces the purchasing power of money, leading to a decrease in real money balances. People may prefer to hold assets other than money, such as commodities or foreign currencies. Barter may increase as people seek alternative means of exchange. A more efficient transactions system is unlikely during hyperinflation. Real tax revenues may increase due to inflationary pressure, but this may not necessarily result in an actual increase in purchasing power for the government.

Hyperinflation Typically Leads To