Jacob Economics - Week 8

In episode 13 we learn about Recession, Hyperinflation, and Stagflation. After WW1 Germany's strategy to pay reparations was to print massive amounts of German money. The result was hyperinflation. Hyperinflation is when a country experiences a monthly inflation rate of over 50% or around 13,000% annual inflation. Hyperinflation is bad because it makes people's savings essentially useless, and people have to spend immediately, so there is no money to start new businesses. Economists call the number of times a dollar is spent per year the velocity of money. When people spend their money as quickly as they get it, that increases velocity, which pushes up inflation even faster. A depression is when real GDP falls and keeps falling for a long period of time. When economies fall into deep recessions, there are more workers than there are jobs and more output than consumers want to buy, so both income and prices fall.