Workbook: Economic development and Policies Flashcards
From the workbook (6 cards)
What is hyperinflation?
Where prices spiral out of control because the government increase the amount of money being printed. It leads to money becoming worthless
How did WW1 contribute to hyperinflation crisis?
- Germany was not prepared for such a long war and borrowed money to pay for the increasing costs (85% of money was borrowed by 1918) rather than raise taxes
- The reparations (£6.6) demanded of Germany in the TOV had to be paid in gold marks, which held their value as the currency declined. This forced the Weimar Gov to print larger quantities of money to meet the payment deadlines
How did the Weimar Republic’s constitution contribute to hyperinflation crisis of 1923?
The constitution made social security a constitutional right - the gov had to support the unemployed. The costs of introducing social reform and welfare (e.g. housing and benefits for the disabled, orphans, war widows etc) increased national debt and worsened inflation of the currency.
What event triggered the hyperinflation crisis of 1923?
French occupation of Rhur (as Germany failed to pay its reparations) resulted in the gov ordering German workers to adopt passive resistance. The Weimar gov had to rely on expensive imports of essential raw materials (e.g. coal), printing more banknotes to pay for it. This led to hyperinflation
Who suffered during hyperinflation?
- Anyone with savings saw them become worthless
- People on fixed incomes/pensioners - wages became worthless
Who benefitted during hyperinflation?
Anyone with debts, mortgages or loans were able to pay these off easily with the inflated money. Groups of businessmen and homeowners took advantage and bought businesses/house at fraction of the cost
