SECTION I Milton Friedman, the great economist and winner of the Nobel Prize for economics (1976) wrote “Inflation is always and everywhere a monetary phenomenon.” The quantity theory of money states that the price level is directly proportional to the money supply. The money supply in turn is controlled completely by the central bank. That is to say given there are no significant changes in other factors that contribute to the aggregate demand, when the money supply is stable, there is stability in price levels. But when the central bank increases the money supply rapidly, the price level will rise rapidly. The “German hyperinflation” case addressed the causes and consequences of extremely high inflation in an economy. The costs of hyperinflation are manifold and detrimental to economic growth as evident in interwar Germany. The Government, the Central bank, the private sectors and Allies were the key players in this context. The heavy war reparations broke the economy; however the central bank was responsible for accelerating the inflation to unprecedented levels. SECTION II There are four economics frameworks ' the Allies, the Government, the private sectors and the Central bank ' involved in the cause of hyperinflations. Below is a look at the involvement of each framework, where we can see the main responsibility of causing the hyperinflation of the Central bank. Allies Although we can say war reparations were the fundamental cause of the hyperinflation, in our point of view, the Allies were not responsible for that crisis due to the following reasons: They allowed a reasonable repayment period of thirty years. In other words, they did not push the German government to rush to find resources for repayment in a short period. The Government Although the German government was politically responsible for the state of the economy, we believe that the Government had no choice of their role in the hyperinflation because:...