Venezuela is not the best place to do business. Inflation is so high that menu costs, normally insignificant, would be high. The government has cut ties with the International Monetary Fund and does not want to switch to a more stable currency to prevent further inflation, as Zimbabwe did when it switched to the US dollar. But what could make inflation more rampant? Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Because inflation is how much money supply growth exceeds GDP growth, assuming velocity is constant (the quantity theory of money), Venezuela must print more money than its economy grows. The government, short of cash due to low market prices of its main source of tax revenue, oil, is likely printing a lot of money in the form of seigniorage. However, due to the same low oil prices, Venezuela's economy suffers from lower net exports and lower economic production overall. So, to maintain Venezuela's subsidized status, the government simply prints more money, without realizing that the same inflation caused by excess seigniorage is causing the very goods they are trying to subsidize to be in shortage, with people who rush to buy groceries before their money becomes useless and the country probably finds it difficult to import with an ever-inflating currency. In short, the government is printing much more money than its economy is growing, and under conditions of hyperinflation, with positive velocity, inflation actually grows more than the growth of the money supply. This model is actually one I could almost completely agree with; Venezuela's inflation is caused by its own government's incompetence and pride in economic affairs. The large amount of government subsidies it offers requires strong tax revenues. However, when its tax revenues decline due to a contracting economy, instead of gradually weaning the economy to a freer market system, it simply continues to print money, without realizing that printing money, as numerous countries have demonstrated previously, it's not exactly the best solution. recipe for success. Remember: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay By cutting ties with potential benefactors like the IMF, Venezuela is forced to rely on a few sources of credit. And in this world where the law of the jungle apparently still reigns, those few creditors could convert leverage into political control; Venezuela's gradual dependence on creditor countries is its fault, the result of its government's decisions. The real victims are the Venezuelan people, who endure a hyperinflationary economy.