Step 1: Understanding inflation.
Inflation signifies a general increase in the price level of goods and services within an economy over a period.
While normal inflation (3–6%) is generally manageable, exceptionally high inflation negatively impacts purchasing power.
Step 2: Defining hyperinflation.
Hyperinflation is characterized by an extremely rapid and uncontrolled surge in prices, often exceeding 16% annually, and in severe instances, surpassing 100% monthly.
Historical examples include Germany in the 1920s and Zimbabwe in the 2000s.
Step 3: Evaluating options.
- (1) 16 percent or more per annum: Accurate. Hyperinflation is detrimental and commences at very high rates.
- (2) 3 percent per annum: Represents mild inflation and is not dangerous.
- (3) 10 percent per annum: Indicates high inflation but does not qualify as hyperinflation.
- (4) 6 to 9 percent per annum: Denotes moderate inflation.
Step 4: Conclusion.
Therefore, hyperinflation is identified by price increases of 16 percent or more per annum.