Macro economics Essay Example | Topics and Well Written Essays - 1000 words - 2

macro instruction economics - Essay Example pompousness that comes with recession is normal but hyperinflation is a nightmare.Hyperinflation occurs when inflation is out-of-hand qualification a currency lose its value while prices soar at an alarming rate ( Sheffrin, 341). Inflation is actually a normal part of an economic cycle which occurs at certain times in a year, but when inflation is not headed towards equilibrium, hyperinflation happens. Among the worlds worst case of inflation, Hungary stands out ascribable to the phenomenal nose-dive of its currency the pengo. This happened to Hungary between the last quarter of 1945 towards July 1946. In order to fully understand the order of magnitude of this hyperinflation, it must be pointed out that a year before the hyperinflation ( 1944 ), the pengos highest denomination was only 1,000. A year later, the highest denomination wasalready a staggering 10,000,000 pengo. It meant that one needs an awful lot of capital to purchase an item due to the low value of currency. This instance did not end the cycle , it counterbalance got worse when the pengo reached its highest denomination in 1946 a shocking 100,000,000,000,000,000,000 peng. The rate of the pengo was fluctuating faster than the weather as radio announcements were made daily to adjust its rate. Even when the pengo was replaced by the forint ( new currency ) in 1946, however the value of the circulating Hungarian amounted to one-thousandth of one US dollar ( Judt 87). In fact, some pictures from aged Hungarian newspapers depict people sweeping the almost useless banknotes. In contemporary times, this can be compared to the hyperinflation that occurred in Zimbabwe however, the Hungarian incident is more severe as the inflation reached a peak of 1.3 x 11016 percent per month (prices double every 15 hours) according to the report of Zimbabwe Situation in 2008. in that location are many reasons why hyperinflation occurs in an economy. Among the preval ent factors are economic depression, aftermath