While hyperinflations are always caused by rapid growth in the money supply, they can be intensified…

While hyperinflations are always caused by rapid growth in the money supply, they can be intensified by the actions of households and firms trying to protect themselves from inflation by spending money as soon as they receive it.

a. What is likely to happen to the velocity of money during a hyperinflation?

b. Use the quantity equation to show how the change in velocity affects the inflation rate.

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