Hyperinflation typically leads to
A)a reduction in barter.
B)a reduction in real money balances.
C)a preference for domestic over foreign currency.
D)an increase in real tax revenues collected by the government.
E) all of the above

Question

Quizplus · Accepted Answer

Hyperinflation reduces the purchasing power of money, resulting in a decrease in real money balances. This means that people will prefer to hold less money and will likely switch to barter or foreign currencies, as they will be more valuable than the domestic currency. The government may collect more nominal tax revenue due to inflation, but the real revenue will decrease as the purchasing power of the currency decreases.

Hyperinflation Typically Leads to