Final answer:
In the early 1920s, Germany experienced severe hyperinflation due to the government printing money to pay its debts, leading to rapid devaluation of the German Mark and contributing to the social instability that preceded Hitler's rise to power.
Step-by-step explanation:
The economic situation that developed in Germany in the early 1920s was one of hyperinflation. Following the end of World War I, Germany's Weimar Republic faced retaliatory economic conditions from the Treaty of Versailles, including reparations that strained the national budget. In 1923, the situation worsened when France seized the Ruhr Valley, a key industrial region, after Germany failed to make its reparations payments. The German government began printing money to pay for striking workers and other expenses, leading to a loss of value of the German Mark. Prices increased so rapidly that employees would be paid and immediately spend their wages to keep ahead of rising prices. The savings of the middle class were devastated, and the economic turmoil contributed greatly to the social unrest that Adolf Hitler would eventually exploit in his rise to power.