America's Foreign Policy Practice Exam 2026 - Free Practice Questions and Study Guide

Question: 1 / 400

What characterized 'dollar diplomacy' under U.S. foreign policy?

The abandonment of military intervention

The use of economic power to influence foreign nations

Dollar diplomacy is characterized by the use of economic power to influence foreign nations and promote American interests abroad. This approach, primarily associated with President William Howard Taft's administration in the early 1900s, emphasized economic engagement over military intervention. By leveraging financial investments and loans, the U.S. aimed to stabilize regions, particularly in Latin America and East Asia, while ensuring that those nations remained aligned with American interests.

The reliance on economic tools rather than military force allowed the U.S. to assert its influence in a more subtle and often more effective manner. This strategy was seen as a way to achieve foreign policy goals without the direct costs and repercussions associated with military actions. Hence, the hallmark of dollar diplomacy was indeed its focus on using financial instruments to cultivate relationships and expand the United States' reach and influence globally.

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A focus on isolationist policies

The promotion of monarchies in Latin America

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