Economics Problem Solving

This assignment addresses the economic consequences of hyperinflation in Zimbabwe, specifically focusing on the widespread adoption of foreign currencies like the US dollar and South African rand. The solution explains that the lack of a stable domestic currency led to difficulties in determining the value of goods and services, resulting in price instability and economic hardship. The use of foreign currencies provided a more stable medium of exchange and a benchmark for pricing, although it didn't solve the underlying economic problems. The solution references scholarly articles to support its analysis of the situation.

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Without money, everything would become more expensive. In countries such as Zimbabwe,
which had problems with high inflation, the increased use of another country’s currency (such as
the U.S. dollar or South African rand) became common. Why do you suppose this occurred?
Answer
The value of the products is determined by the money and any evaluation for any materialistic
thing cannot happen without the use of money. When the barter system used to exist, the people
faced a lot of difficulty because they had to search for the appropriate products and in many
cases; they ended up exchanging a very expensive thing with a very cheap thing. So, there was
no medium to determine the value of the things that were sold in the market. For example, the
exchange of diamonds and grains do not make sense but if there was no money, then the people
would have done this. This would cost more to the people and more the economy as well. When
the appropriate vale of things cannot be fixed, and the worth of the things cannot be established
(Federal Reserve Bank of St. Louis, 2013), they will become expensive and the overspending
will happen.
When Zimbabwe had high inflation and the currency of other country was used, the products
were priced in currencies like dollars and cents. The people were unable to buy the goods with
limited salary and they were unable to feed themselves. This basically happened because there
was no medium by which the worth of the things in the country could be calculated. But, the
goods were available at the costs that were equal to the other countries (Hobbes, 2014). So,
something was required to measure their worth.

2
References:
Federal Reserve Bank of St. Louis. (2013, March). Money and Inflation: A Functional
Relationship. Economic Research: Federal Reserve Bank of St. Louis. Retrieved from
http://research.stlouisfed.org/pageoneeconomics/uploads/newsletter/2013/
PageOneCLassroomEdition0313_Money_Trade_Barter_Inflation.pdf
Hobbes, M. (2014, January 5). Zimbabwe Prices: Why Are They as High as New York City's?
New Republic. Retrieved from http://www.newrepublic.com/article/115925/zimbabwe-prices-
why-are-they-high-new-york-citys