A

1. Why cannot the value of all commodities, gold included, rise or fall at the same time ?

2. What is the relation between the price level and the value of an ounce of gold?

3. How does a change in the price level affect individual incomes? public incomes?

4. What is the relation of changing price level to social unrest ?

5. Why is it desirable to measure fluctuations in price level ?

6. What is the principle underlying the use of index numbers ?

7. How are index numbers applied to business affairs?

8. Just how does the shifting of the price level affect industry?

9. Why should a crisis usually be found associated with high prices ?

10. What is meant by the expression "overproduction"?

11. What has been the experience of the United States in panics?

B

1. Call to mind some experiences of your own in which the price level has appeared to change.

2. Learn from inquiry how a rise of the price level has affected some stationary income such as a pension or an annuity.

a. Does the person receiving the income realize that it has declined in purchasing power?

b. If so, what is his (or her) explanation of the decline?

i. Is it based on changes in value of commodities? ii. Is it based on changes in the purchasing power of money?

c. Which of the two explanations appears to be the more correct ?

d. How, if at all, could the receiver of this stationary income protect himself (or herself) from a loss in its purchasing power ?

e. What is the likelihood that changes in the purchasing power of stationary incomes will discourage savings and investments ?

3. Assume prices for eleven important commodities for two given years, say 1914 and 1919.

a. Compare the price level for the two periods.

b. How would the change in price level have affected an annuity of $800?

c. How, if at all, would you expect this change to affect wages in general ? wages of any particular group ?

d. How should wages be so adjusted as to place the wage-earner in 1919 on the same income level he had occupied in 1914?

e. What change should be made in the weight of the gold dollar in order to give it the same purchasing power in 1919?

C

1. If, during a single night, the general price level should double, what would be the immediate effect and the long-run effect on the income of each of the following: a. Wheat-grower?

b. Owner of a gold mine?

c. Day laborer?

d. Jewelry manufacturer?

e. Civil War pensioner? /. High school student?

2. Since the fluctuations of the price level tend to create social unrest, why does not the government set the prices of all commodities and fix labor incomes ?

3. Account for the fact that wages invariably react slowly to a rising price level.

4. Why does the government make little or no effort to prevent crises ?

5. Discuss the practicability of changing the weight of the gold dollar to correspond with changes in general price level.

Supplementary Reading

Bullock, Introduction to the Study of Economics, 3d ed., pages 333-348.

Ely, Outlines of Economics, 3d ed., pages 317-343.

Fetter, Economics, Vol. II, pages 48-54.

Fisher, Elementary Principles of Economics, pages 144-164.

Seager, Principles of Economics, pages 375-382.

Seligman, Principles of Economics, 5th ed., pages 456-473.

Taussig, Principles of Economics, 2d ed., Vol. I, pages 290-309.