Why Did the European Currency Crisis of 1992 Occur

question 21

Multiple Choice

Why did the European currency crisis of 1992 occur?

• A)Germany raised its interest rates to combat inflation,which led investors to question whether other European countries would keep their currencies pegged to the Deutsche mark.
• B)West and East Germany reunited after the Cold War ended,which led investors to question whether the country could support the Deutsche mark,so they sold the currency and bought U.S.dollars.
• C)Sweden raised its interest rates to 500 percent to reduce inflation,which led investors to dump their other currencies and buy Swedish krona.
• D)A housing bubble collapsed in Italy,sparking a financial crisis throughout the region.
• E)The United States withdrew troops and reduced military spending after the end of the Cold War,which caused Western European economies to shrink.

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Definitions:

Subvert

To undermine or overthrow an established system or institution, often through covert means.

Sabotaging a Policy

Deliberately obstructing or undermining the implementation or success of a specific policy or plan.

Modifying

The act of making changes to something, typically to improve it or to fit specific requirements.

Administrative Regulations

Rules and directives created by government agencies that have the force of law, governing how laws will be enforced and adhered to.