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Definition of 'Hyperdeflation'

Hyperdeflation is a severe and prolonged decline in the general price level of goods and services. It is the opposite of hyperinflation, which is a rapid increase in prices. Hyperdeflation can be caused by a number of factors, including a sudden drop in demand, a decrease in the money supply, or a financial crisis.

Hyperdeflation can have a number of negative consequences for an economy. It can lead to a decrease in economic output, a rise in unemployment, and a decline in investment. It can also make it difficult for businesses to borrow money and for consumers to buy goods and services.

In extreme cases, hyperdeflation can lead to a complete collapse of the economy. This is what happened in Germany in the early 1920s, when the country experienced a period of hyperinflation followed by hyperdeflation. The German hyperinflation was caused by a number of factors, including the government's printing of large amounts of money to finance World War I. The hyperdeflation that followed was caused by the collapse of the German economy and the loss of confidence in the currency.

Hyperdeflation is a rare phenomenon, but it can have a devastating impact on an economy. It is important to be aware of the risks of hyperdeflation and to take steps to mitigate its effects.

Here are some of the things that can be done to mitigate the effects of hyperdeflation:

* The government can increase spending to stimulate the economy.
* The government can lower interest rates to make it cheaper for businesses to borrow money.
* The government can provide financial assistance to businesses and consumers.
* The government can work to restore confidence in the currency.

By taking these steps, the government can help to prevent a complete collapse of the economy and to mitigate the negative effects of hyperdeflation.

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