Question

If a foreign county experiences a hyperinflation, Multiple Choice its currency will depreciate against stable currencies. its currency may appreciate against stable currencies. its currency may be unaffected-it's difficult to say. none of the options

Answer 1

A. its currency will depreciate against stable currencies

Step-by-step explanation:

Hyperinflation is the economic situation whereby there's a very high and accelerating increase in the prices of goods and services. It's rare and occurs when prices have risen by more than 50% per month over a long period of time. When hyperinflation occurs, the currency of the country suffering from hyperinflation will depreciate against those countries with stable currencies. Hyperinflation causes a wider trade deficits by increasing cost of production, thereby making the country export less, making them less competitive in the global markets, thus causing the devaluation of the currency.