Summary 8 - Recovery from the Depression

Question 1

Who played a key role in ensuring that the German economy recovered from the Depression?

Answer 1

Hjalmar Schacht

Question 2

Which two positions did Schacht hold?

Answer 2

• He was President of the Reichsbank
• He was made Economic Minister in August 1934

Question 3

When was Schacht made Economic Minister?

Answer 3

August 1934

Question 4

What policies did Schacht employ as Economic Minister?

Answer 4

• He increased government spending
• He cut taxes
• He implemented price controls

Question 5

How did Schacht’s policy’s lead to a reduction in the unemployment rate?

Answer 5

Increased government spending created jobs and orders for factories.

Question 6

When was military conscription reintroduced and what impact did it have on the rate of unemployment?

Answer 6

Military conscription was reintroduced in 1935, this helped to further lower the rate of unemployment.

Question 7

What was the impact of tax cuts?

Answer 7

By using tax concessions and grants the government stimulated consumer demand. This stimulated more orders for factories and increased the demand for workers.

Question 8

Why did the government ensure that wages and prices were controlled?

Answer 8

The government ensured that the controlled wages and prices so that inflation was kept under control.

Question 9

The Nazis encouraged the building of Autobahns to stimulate the economy. By 1942, how many kilometres of road had been built?

Answer 9

3870

Question 10

How many workers were employed in the building of Autobahns before 1942?

Answer 10

125,000

Question 11

Why was the Autobahns underused?

Answer 11

Very few Germans owned cars so the autobahns were underused.

Question 12

Give the unemployment figures for 1932, 1934, 1936 and 1938?

Answer 12

1932 - 5.6 million were unemployed
1934 - 2.3 million were unemployed
1936 - 1.6 million were unemployed
1938 - 0.2 million were unemployed

Question 13

When was the New Plan introduced and what was its purpose?

Answer 13

• The New Plan was introduced in 1934
• Its purpose was to improve Germany’s Balance of Payments (international trade)

Question 14

As the German economy recovered, the volume of foreign trade increased but the volume of imports outweighed the volume of exports. What was the impact of this?

Answer 14

Germany operated a current account deficit.

Question 15

Why was the New Plan implemented and what was its impact?

Answer 15

A shortage of foreign currencies led Schacht to introduce the New Plan: This controlled the number of imports and access to foreign currencies.

Question 16

Schacht made trade deals with the Balkans and South America in which Germany bought food and raw materials and paid in German Reichsmarks (not foreign currency, as normal). Why was this beneficial to the German economy?

Answer 16

The supplying countries then used the German currency to buy goods from Germany.

Question 17

Why did the Nazis not want to borrow too much money to fund rearmament?

Answer 17

The Nazis were fearful that borrowing an excessive amount of money would cause inflation.

Question 18

What did Schacht create in order to enable the Nazis to fund rearmament without causing inflation?

Answer 18

Mefo Bills were created

Question 19

What did the creation of Mefo Bills allow the German government to do?

Answer 19

Mefo Bills allowed the German government to pay for rearmament with credit notes.

Question 20

How did the Mefo Bill system work?

Answer 20

The government paid for military equipment using Mefo Bills. The companies who received their payment in Mefo Bills could exchange their Bills for Reichmarks at the Reichsbank at any time but were offered incentives to defer asking for the money.

Question 21

How much extra were firms paid if they did not exchange their Mefo Bills for five years?

Answer 21

If they kept the Mefo Bill for five years, they were paid an extra 4%.

Question 22

Give two benefits of the implementation of Mefo Bills?

Answer 22

• Germany was able to begin rearmament in 1935 but the government did not have to acquire the funds to pay for it yet
• The government was able to keep rearmament a secret as the expenditure did not appear on their accounts