A

1. Just why did the medieval church oppose the taking of interest?

2. What is the difference between a consumption loan and a production loan ?

3. In the conversation between Shylock and the merchant Antonio, what is the significance of the following expressions: "usances"? "barren metal"? "exact the penalties"?

4. Just how was a silent partner able to loan money without evading the law?

5. What are the two aspects of interest ?

6. Why will borrowers pay interest on loans?

7. Why must lenders be rewarded?

8. What determines the maximum interest rate a borrower will pay?

9. What is the lowest interest rate which a lender will accept ?

10. Just why are present goods usually valued more highly than future goods?

11. Is saving painful ? Explain.

12. Why should the legal interest rate be higher in Wyoming than in Massachusetts ?

13. What is a "call loan"?

14. Why do lenders prefer a call loan to a time loan?

15. Why is the interest rate on bonds usually lower than the dividends on stocks of the same concern?

16. Why is a railroad bond more negotiable than a farm mortgage?

17. What kind of real estate mortgages resemble bonds?

18. Where is the best market for real estate mortgages usually found?

19. Why are real estate mortgages usually recorded?

B

1. Put the following questions to some friendly business man: "Why are you willing to pay interest on borrowed money ? " "Would you be willing, rather than to do without, to pay a higher rate than you now pay?" "How would an increase in the current interest rate be likely to affect your business?"

2. Examine any metropolitan newspaper for quotations on New York interest rates.

a. Name the various kinds of loans found.

b. Which bears the higher interest rate?

c. Consult some banker regarding the New York interest rate. i. Inquire about the nature of a demand loan.

ii. Ask him to explain why the rate on commercial loans varies but slightly.

d. Compare these quotations with quotations found in older newspapers.

3. Call to mind instances when present goods commanded a very high premium over future goods; when future goods were more greatly desired than present goods.

4. Name five forms of investment with which you are familiar.

a. Which bears the highest interest rate? the lowest?

b. To what extent does risk cause the difference ?

5. Inquire of some banker concerning the opportunities of banks in the older states to loan money in the newer regions.

C

1. Aristotle spoke of money as being barren, and hence incapable of producing interest.

a. Do enterprisers borrow money, or is it, in the long run, equipment for producing goods?

b. What assurance has an enterpriser that his borrowed equipment will reproduce itself and something over in the way of interest?

2. Suppose it should become generally known that excessive profits are being made in the manufacture of shoes.

a. How would this knowledge affect enterprisers in other lines?

b. What would be the effect on the production of shoes?

c. Would the prices of shoes rise or fall ? Why ?

d. How would this change affect the profits of shoe-manufacturers ?

3. Discuss the desirability of a state legislature fixing a legal rate of interest above which the law provides a penalty for going.

4. As a result of an insistent demand the government established in 1916 a farm loan bank which furnishes farmers money at a moderate rate of interest.

a. From which sections of the country would you expect the demand to have been the strongest? Why?

b. How did the bankers regard this new bank?

c. Has it succeeded to an extent in equalizing the interest rate over the whole country?

5. The "sacrifice" theory of interest is often criticized on the ground that such men as Rockefeller and Morgan make no sacrifices in abstaining from consuming their wealth.

a. Can wealthy men like these save all the capital needed?

b. Which savers exert the greatest influence in fixing the interest rate?

c. Do these savers sacrifice ? Explain.

Supplementary Reading

Bullock, Introduction to the Study of Economics, 3d ed., pages 423-435,

Ely, Outlines of Economics, 3d ed., pages 493-524.

Fetter, Economics, Vol. I, pages 235-313.

Fisher, Elementary Principles of Economics, pages 410-432.

Johnson, Introduction to Economics, pages 217-231.

Seager, Principles of Economics, pages 262-282.

Seligman, Principles of Economics, 5th ed., pages 313-328.

Taussig, Principles of Economics, 2d ed., Vol. II, pages 3-43.