Summary of the Article

question 18

Multiple Choice

Summary of the article:
Zimbabwe Abandons Price Controls, Promotes Currency Trading
By Brian Latham
Bloomberg
January 29, 2009
In response to continued recession and a currency which had become virtually worthless, Zimbabweʹs acting
finance minister Patrick Chinamasa announced in January 2009 that the government would abandon all price
controls and allow Zimbabweans to use any nationʹs currency to conduct business.
In 2009, Zimbabwe entered its eleventh year of recession and its inflation rate, estimated to be 231 million
percent in July 2008, was the highest in the world. Due to the inflation, most businesses stopped conducting
business using the Zimbabwean dollar, and the government announced that government employees would
start being paid with vouchers which could be exchanged for foreign currency.
-The Application addresses the economic concept of

• A)chain indexes.
• B)hyperinflation.
• C)cost-of-living adjustments.
• D)deflation.

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Definitions:

Recession

A short-lived economic contraction, featuring a reduction in both trade and industrial activities, conventionally confirmed by observing a GDP decrease in two back-to-back quarters.

Money Demand Curve

A graphical representation showing the relationship between the interest rate and the total quantity of money that people hold at various levels of interest.

Nominal GDP

The market value of all final goods and services produced within a country in a specific period, measured in current prices.

Price Level

An index that measures the average of current prices of goods and services in comparison with the prices in a base year.