A Level History - America - Practice Exam

What was a significant effect of U.S. international debt during the 1920s?

1. Europe’s economy was thriving

2. Increase in U.S. exports

3. Difficulty for Europe to repay loans and tariffs

4. Reduction of American loans to Europe

The correct answer is: Difficulty for Europe to repay loans and tariffs

The significant effect of U.S. international debt during the 1920s was the difficulty for Europe to repay loans and tariffs. After World War I, the United States emerged as a dominant economic power, lending substantial amounts of money to European nations to help rebuild their economies. However, many European countries struggled to recover financially due to a variety of factors, including the lingering effects of the war, economic instability, and changing global economic conditions. As these nations faced difficulties, the burden of repayment became increasingly challenging. High tariffs, particularly the Smoot-Hawley Tariff, further compounded the problem by restricting trade and limiting the ability of European countries to earn the foreign currency needed to pay off their debts. This scenario created a cycle of economic distress, as the inability of European nations to repay loans contributed to a strain on the American economy, particularly as the 1920s progressed and leading up to the stock market crash in 1929. This understanding of the context showcases how interlinked the economies of the U.S. and Europe were during this period and the implications of U.S. loans on European economic recovery.