During a period of hyperinﬂation,
A) creditors gain because their loans are repaid with dollars of higher value.
B) people tend to hold goods rather than money.
C) income is redistributed away from borrowers.
D) the real value of the national currency rises.

Question

Quizplus · Accepted Answer

During hyperinflation, the value of the currency plummets rapidly, making it a less desired medium of exchange or store of value. As a result, people tend to prefer holding goods, such as food or precious metals, rather than money. This leads to shortages of goods and further exacerbates the inflationary spiral. A, C, and D are incorrect because creditors may suffer as the real value of their loans dwindles, borrowers may struggle to pay back loans in devalued currency, and the national currency's real value declines during hyperinflation.

During a Period of Hyperinﬂation