Dear Team,

I define the term hyperinflation in three ways for this week’s assignment. The three ways include the parenthetical definition, sentence definition, and expanded definition.

Reading Situation: I work in assisting businesses overseas in Zimbabwe, where hyperinflation takes place. I need to explain to large customers (those purchasing large quantities of goods in business-to-business (B2B) interactions (therefore having a basic understanding of how business processes occur)) what is happening in the economy. The B2B customers require knowledge about hyperinflation (especially in their country of Zimbabwe) to allow them to adjust business practices in case the economy becomes worse.

Parenthetical Definition: The country faces hyperinflation (uncontrolled and quickly increasing prices in an economy)(Kenton, 2021).

Sentence Definition: Inflation is the rising of prices of goods and services in an economy. Hyperinflation is the extreme increase of inflation (DeNicola, 2021).

Expanded Definition: Hyperinflation is the extreme increase of inflation (the rising of prices of goods and services in an economy). The extreme type of inflation is caused by a few factors. One factor is the strong overall demand for goods and services with an inadequate supply, which causes sellers to raise prices (Amadeo, 2020). Overall, there are many reasons for increased demand for goods with low supply; some examples include changes in trade (ex. imposed import restrictions), a variety of consumer spending, and governments spending too much money (ex. governments supplying money for new homebuyers in Greater Vancouver, which causes prices of homes to increase).

Figure 1. A simple explanation of how hyperinflation occurs.

Source: what-is-hyperinflation-definition-causes-and-examples-3306097-Final-58ea47ee1dd94b16b061214dcc8dae77.png

The other factor is the excessive production of currency. Prices of goods and services increase when money is printed at high rates over an extended period. Once inflation is realized by the public, they will buy more, thus adding to the other factor of increased consumer spending (Amadeo, 2020).

When hyperinflation occurs, non-perishable goods are the first products to be purchased in bulk by consumers (who expect shortages). These consumers will add to the rising inflation and raise the prices of those goods that do not expire. The prices of non-perishable goods will increase due to low supply and high demand (caused by individuals buying in bulk). Once inflation continues, perishable goods will see significant price increases, thus causing people to buy more to stockpile, creating shortages. When perishable goods are scarce, the economy will be on the verge of collapse (Amadeo, 2020).

How does the average individual prepare for inflation? By diversifying your assets, one can be prepared if certain investments drop in value (Amadeo, 2020). Examples of good assets are gold, foreign stocks, and US bonds. Ensure that your assets are not directly correlated to currency (DeNicola, 2021). Lastly, negotiating skills are helpful, as basic living needs could become rare and currency may lose nearly all of its value.

Works Cited

Amadeo, Kimberly. “Hyperinflation: It’s Causes and Effects with Examples.” Edited by Michael J Boyle, The Balance, 30 June 2020,
https://www.thebalance.com/what-is-hyperinflation-definition-causes-and-examples-3306097

DeNicola, Louis. “What is hyperinflation? Understanding the rapid increase in the cost of goods and services over time.” Insider, Insider, 16 September 2021,
https://www.businessinsider.com/hyperinflation

Kenton, Will. “Hyperinflation Definition.” Edited by Charles Potters, Investopedia, 12 August 2021,
https://www.investopedia.com/terms/h/hyperinflation.asp