Argentines Buckle Under 103% Inflation

EconEye Admin

3 years ago

Argentines say that the current 102.5%-and-climbing inflation rate is making it almost impossible to get by. Consumers substitute cheaper products and every trip to the supermarket is a reminder of the country’s inflationary crisis, the worst since 1991 when a period of hyperinflation ended. —reuters.com

Answer the following questions to check your understanding of the story.

1) What does it mean to have an inflation rate of over 100 percent per year?

An inflation rate of 100 percent per year means that during the last year, ______________.

a) the average level of prices doubled

b) the quantity of goods that people can afford decreased by half

c) prices of food, shelter, and clothing doubled

d) prices of all goods and services doubled

Wrong! - Inflation is a persistently rising price level. What is the price level? When inflation occurs, do all prices rise by the rate of inflation?

Correct! - Inflation is a persistently rising price level, and the price level is the average level of prices. So an inflation rate of 100 percent per year means that during the last year, the average level of prices doubled.

2) How does Argentina’s inflation rate in 2023 compare with 1991?

a) Argentina experienced hyperinflation in 1991 and in 2023.

b) We can’t make the comparison without more information about consumer substitutions.

c) The inflation rate was higher in 1991.

d) The inflation rate was higher in 2023.

Wrong! - Argentina experienced hyperinflation in 1991. What is the monthly inflation rate when an economy experiences hyperinflation? What is Argentina’s inflation rate in 2023?

Well Done! - In 1991, Argentina was experiencing hyperinflation—an inflation rate of 50 percent a month (12,875 percent a year) or higher. The peak annual inflation rate in 1991 was 20,263 percent. In 2023, the annual inflation rate was 102.5 percent.

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