Question

Nations that lack adequate __________ tend to experience hyper-inflation or depression.

a) Currency controls
b) Administrative delays
c) Local content requirements
d) Tariffs

Answer 1

Adequate currency controls are vital to prevent hyper-inflation or depression. Lack of such controls can lead to overprinting of money, resulting in hyper-inflation as seen in Zimbabwe, which solved its crisis by adopting the U.S. dollar.

Step-by-step explanation:

Nations that lack adequate currency controls tend to experience hyper-inflation or depression. Hyper-inflation can emerge from situations where government agencies, devoid of funds to pay their employees, resort to printing money to cover expenses rather than increasing taxes. As a result, with too much money in circulation chasing too few goods, prices soar, leading to the enactment of price controls, shortages, and black markets. An example of this is Zimbabwe, where the government's printing of higher denomination bills, such as the $100 trillion note, made the currency nearly worthless. The solution was to abandon the national currency and allow the use of foreign currencies, such as the U.S. dollar, which immediately halted hyperinflation.