The National Economy

1. Does the presence or absence of property rights make any difference to people who own no property? For example, are tenants affected economically by whether the community in which they rent apartments or houses allows unbridled property rights or reduces those property rights through zoning laws, open space laws, height restrictions on buildings, or rent control laws? Explain how people who own no property are affected.

2. During the Great Depression of the 1930s, both Republican President Herbert Hoover and his successor, Democratic President Franklin D.

Roosevelt, tried to keep up the prices of goods and labor. What was the economic problem with these policies?

3. During a period of inflation, does money circulate faster or slower-and why? What are the consequences? What do you suppose happens during a period of deflation-and what are the consequences then?

4. During an all-out war, how can a country's military plus civilian consumption add up to more than its output, without borrowing from other countries?

5. "Under both capitalism and socialism, the scarcity of knowledge is the same, but the way these different economies deal with it can be quite different." Explain.

6. "The nationalization of banks in India was not simply a matter of transferring ownership of an enterprise to the government. This transfer changed all the incentives and constraints from those of the marketplace to those of politics and bureaucracy." Explain what consequences followed and why.

7. Even if detailed statistics are available, why is it difficult to compare the national output at the beginning of the twentieth century with the national output at the beginning of the twenty-first century, and say by what percentage it has increased? Why is it hard even to say how much prices for particular goods have increased from one century to another?

8. Why would an Albanian bank, with 83 percent of the country's deposits, refuse to make any loans? And what were the consequences for the Albanian economy?

9. In a free country, people can express their desires either through the political system or through the marketplace. What difference does it make which one they choose? Explain why the end results are, or are not, likely to be any different.

10. Since "money talks" in the marketplace, why would rich people want to shift some decisions out of the marketplace and have them settled politically or by courts? (Hint: housing is a classic example.)

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