What Is Hyperinflation?

Answer:

Loss of purchasing power of money at such a rate that comparison of amounts from transactions or other events that have occurred at different times, even within the same accounting period, is misleading.

Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:

• The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.

• The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency.

• Sales and purchase on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.

• Interest rates, wages and prices are linked to a price index.

• The cumulative inflation rate over three years is approaching, or exceeds, 100%.