What characterizes hyperinflation?

Hyperinflation is defined by an extraordinarily high and typically accelerating rate of inflation, often exceeding 50% per month. It disrupts economic stability and reduces the purchasing power of money dramatically, leading to extreme financial uncertainty. In such scenarios, prices for goods and services rise uncontrollably, rendering traditional monetary policy ineffective.

The correct answer highlights that hyperinflation is not simply a high inflation rate; it is characterized by rates so extreme that they can lead to a loss of confidence in the currency, with people often abandoning it in favor of more stable currencies or barter systems. Understanding hyperinflation is crucial for recognizing its severe implications for economies, including social and political instability.