AMERICAN IMPERIALISM 1890 1919
TREATY OF VERSAILLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Inflation caused their currency to lose purchasing power.
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Deflation caused the value of their currency to increase
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Their currencies became uniform across all countries.
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None of the above
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Detailed explanation-1: -When inflation is higher, this tends to have a depressing affect on the value of a country’s currency. This is because increased inflation reduces the currency’s buying power, which weakens it against other currencies. The impact of increasing inflation on currency conversion rates is usually downwards.
Detailed explanation-2: -By 1935, most countries had dramatically altered the parity value of their currencies: 31 had done so by more than 40% and 5 by more than 30%, while only 12 kept their prices stable (although many of those had already devalued their currency by 1929) (Bank 1935, pp.
Detailed explanation-3: -What Is Currency Depreciation? Currency depreciation is a fall in the value of a currency in terms of its exchange rate versus other currencies. Currency depreciation can occur due to factors such as economic fundamentals, interest rate differentials, political instability, or risk aversion among investors.
Detailed explanation-4: -A currency crisis is brought on by a sharp decline in the value of a country’s currency. This decline in value, in turn, negatively affects an economy by creating instabilities in exchange rates, meaning one unit of a certain currency no longer buys as much as it used to in another currency.