When I was traveling in Belgrade, Serbia, I learned about a currency museum. And to be honest, the thing that excited me the most was that I could have fake currency printed with my face on it: who doesn't want their face on money? But when I went to the museum, I also learned a lot about the history of currency in Serbia and Yugoslavia (which Serbia had formerly been a part of).

During the early 1990s, the currency of Yugoslavia went through a period of massive hyperinflation due to a recession, a series of wars, a United Nations boycott of Yugoslavia, and general instability in the region. During this time, prices rose so quickly that money quickly lost its value. There were so many currency reforms between 1990 and 1994, where new currency was printed to replace old currency, and larger-valued banknotes were being printed, that by January of 1994, one novi dinar was equal to over 1 x 10^27 pre-1990 dinars. Money was losing its value overnight, so much that it was better to buy goods as soon as you were paid, and even waiting a single day would decrease the purchasing power of your money.

Sample Problems

1. In January 1994 the monthly rate of inflation peaked at 313 million percent. Calculate the daily inflation rate (assuming it was constant throughout the month).

2. Suppose that you wanted to buy a $10,000 car (we'll use dollars because it's an easier currency to imagine). If you waited a day to purchase the car, with this inflation rate, how much would the car cost the next day?

3. Approximately how many days would it take for prices to double?

4. Calculate the hourly inflation rate (assuming it was constant throughout the day).

5. Suppose you sat down for a meal that cost $10. If you waited an hour to pay for the meal, with this inflation rate, how much would the meal cost at the end of the hour? How much would you save by paying at the beginning of the meal instead of at the end?