Question

What was the key reason for the post-war cash crunch in America? 1. Decline in the American manufacturing industry 2. France’s demand for repayment of America’s war debt rising3. inflation and unemployment 4. Decline in American imports from Britain 5. Rising trade imbalance with Britain

Answer 1

3 is the correct answer. When WWI was over, the troops that returned from war caused a sudden surge in the size of the labour force, which led to unemployment and wages staying the same. Also, regulations to stop inflation after the war and expectations of deflation in the future led to the crash.