Hyperinflation

By Monica E. Hartmann, Robert J. Werner

Abstract

This case study uses the Zimbabwean experience with hyperinflation to give students an opportunity to apply a variety of economic concepts to a real world event. The topics include, but are not limited to, scarcity, production possibility frontier, supply and demand, and fiscal and monetary policies. Because the four parts of the case are linked together (they use the same economic scenario), students will carry over and apply the knowledge obtained in one part of the case to the next one. As a result, students see the interrelatedness of the macroeconomic issues and obtain a more comprehensive understanding of the issues and not just looking at one aspect in isolation. The case was designed for an introductory macroeconomics college course, but can be modified for a development or agricultural economics course. Instructors can choose to use all parts of the case or just some of them depending on time constraints and topic interest.

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Date Posted

04/01/2011

Overview

Objectives

Weigh the concepts of unlimited wants with scarcity of resources.
Deduce the macroeconomic effects of household budget allocation decisions.
Identify the location in which a country is operating on a production possibility frontier based on a given scenario.
Identify firms' production decisions in response to government price decrees.
Recognize that the government's price decree leads to a movement and not a shift in supply and demand.
Identify how price-setting affects prices, supply, and demand.
Deduce the short-and long-term implications of price ceilings.
Discuss legal and political issues surrounding property rights in Zimbabwe.
Identify how the lack of respect for property rights impacts the macroeconomy.
Represent the macroeconomic effects using the per worker production function.
Recognize that a strong, non-corrupt judicial system is also necessary for economic growth.
Identify actions the government can do to alleviate high unemployment.
Infer consequences of those actions on inflation.

Keywords

Macroeconomics; production possibility frontier; scarcity; supply and demand; hyperinflation; fiscal and monetary policy; land policies; property rights; Zimbabwe; Africa

Subject Headings

Economics

EDUCATIONAL LEVEL

Undergraduate lower division, Undergraduate upper division

FORMAT

PDF

TOPICAL AREAS

Policy issues, Social issues, Social justice issues

LANGUAGE

English

TYPE/METHODS

Analysis (Issues), Discussion

Teaching Notes & Answer Key

Teaching Notes

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Answer Key

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