Hyperinflation is an extreme and rapid increase in prices, typically exceeding 50% per month, which erodes the real value of the local currency. The causes of hyperinflation can generally be attributed to several key factors:
Excessive Money Supply: Central banks may print more money to finance government spending, especially during crises. This increase in money supply without a corresponding increase in goods and services leads to inflation.
Demand-Pull Inflation: When demand for goods and services outstrips supply, prices rise. This can occur in situations where consumer confidence is high and spending increases dramatically.
Cost-Push Factors: Increases in production costs, such as wages and raw materials, can lead producers to raise prices to maintain profit margins. This can trigger a cycle of rising costs and prices.
Loss of Confidence: When people lose faith in the stability of a currency, they may rush to spend it before it loses further value, exacerbating inflation. This is often seen in political instability or economic mismanagement.
Ultimately, hyperinflation results from a combination of these factors, leading to a vicious cycle that can devastate an economy if not addressed swiftly and effectively.
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