Question

Select the statement(s) which is/are true regarding the post World War I situation in Germany.

• A. Germany witnessed deflation.
• B. There was political instability in Germany.
• C. The Treaty of Versailles was severe on Germany.
• D. Printing money solved the issues in Germany.

Answer 1

Answer: (B), (C)

The Treaty of Versailles was severe on Germany.

Germany printed money to pay the debts imposed by the Treaty of Versailles. More money in circulation increased the prices of the products sold. Suppliers increased the prices of products during high demand. This process is called inflation. It went so high in Germany that people carried money in carts to buy a loaf of bread. Thus, Germany witnessed hyperinflation not deflation.