Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions:
-Using what you learned from the quantity theory of money, what is the main cause for the hyperinflation in Zimbabwe?
A) very high money supply growth
B) very high money demand growth
C) very high unemployment rates.
D) very high GDP growth.

Question

Quizplus · Accepted Answer

The quantity theory of money states that inflation is caused by an increase in the money supply relative to the quantity of goods and services in an economy. Zimbabwe experienced hyperinflation primarily due to the government's decision to print more money to finance its budget deficits and to pay off foreign debt. This led to a rapid increase in the money supply, driving up prices and causing hyperinflation.

Recall Application 3, "Hyperinflation in Zimbabwe," to Answer the Following