Problems For Section 261

° 1. The period of the French Wars (1 793-1815 with interruptions) witnessed a large number of "enclosures" (expensive projects of agricultural improvement) in England. Yet interest rates rose up from 4% before the wars to 55% during them, leading some historians to doubt that interest rates had much to do with the decision to enclose. The rate of inflation rose from zero before to 2j% during the wars. Are the historians' doubts well founded?

° 2. Why do you suppose American railways were flimsy and British railways solid in the nineteenth century?

3. Slave prices in the United States rose during the 1850s. Did slaveowners anticipate emancipation?

4. Most emancipation of slaves in the North was gradual, freeing not the slaves but the children of slaves and often freeing the children only after some long period of "apprenticeship" (28 years of age in the Pennsylvania law of 1780, for instance). The owner of a female slave owned her children. Explain, in view of interest rates of 5 to 10%, why you are not surprised to learn that such emancipation cost slaveowners only a few percent of the value of their slaves.

5. News item, The New York Times, December 2, 1973, under the headling "Australia Again Bars Export of Her Prized Merino Rams": "The Australian Merino is considered the top wool-producer in the world as a result of more than a century of intensive selective breeding. In the current situation, with exports allowed, a fine stud Merino may sell for more than $10,000 and some have brought many times that sum in auctions. Merino-raisers oppose export of the studs in the belief that increasing the number abroad would undercut the Australian wool market. Some experts dispute this, however." As an expert in economic analysis, if not in sheep raising, dispute this. In particular, would it be reasonable for specialized Merino-ra/sers to oppose exports?

True or False

6. Since modern corporations finance much of their investment from their own earnings, not from issues of bonds, the interest rate is irrelevant to their decisions.

7. The cost of capital is the same in Lahore and in Cleveland when the interest rates are equal.

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