Answer:
Hyperinflation quickly devalues the local currency in foreign exchange markets as the relative value in comparison to other currencies drops. This situation, will drive holders of the domestic currency to minimize their holdings and switch to more stable foreign currencies.
In an attempt to avoid paying for higher prices tomorrow due to hyperinflation, individuals typically begin investing in durable goods such as equipment, machinery, jewelry, etc. In situations of prolonged hyperinflation, individuals will begin to accumulate perishable goods.
However, that practice causes a vicious cycle – as prices rise, people accumulate more goods, in turn creating higher demand for goods and further increasing prices. If hyperinflation continues unabated, it nearly always causes a major economic collapse.
Severe hyperinflation can cause the domestic economy to switch to a barter economy, with significant repercussions to business confidence. It can also destroy the financial system as banks become unwilling to lend money.
Step-by-step explanation: