Government 1B: Lesson 80 Essay – (1) “Evaluate this claim: ‘The New Deal was a wise series of government actions that healed the problems afflicting the economy.'” (2) “Critics have claimed that the housing boom and bust was a result of the market economy. Can you make a case that it was instead the result of government policy?”

The government did not “heal” the Great Depression, it caused it. It was caused by the government artificially lowering interest rates.  During the Great Depression the government increased the minimum wage a lot. Prices were falling at this time so it was basically like the workers were getting a raise and the businesses couldn’t afford to hire as many people leading to more people being unemployed.

The Housing Bust of 2008 was certainly caused by the government. Fannie Mae and Freddie Mac would buy mortgages from banks. Bankers began to realize they would buy almost any mortgage, so they allowed many people without jobs and money to buy houses and use mortgage loans. Eventually a lot of the risky people would not pay their mortgage payments, so the federal government would print more money to give to Freddie and Fannie. These bailouts and the increasing demand for houses caused higher prices to keep rising and it led people to believe buying houses was great because their value kept rising. Eventually Freddie and Fannie defaulted and the thing collapsed hurting many people who bought homes because their values dropped dramatically.

Government 1B: Lesson 40 Essay- (1)”Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are acheived artificially, by a government established central bank?” (2)”What have been some of the problems with the federal prohibition on certain drugs?”

When interest rates ate lowered due to consumer saving there are  no problems. Businesses then borrow when consumers don’t want products from businesses, so the timing and costs are better. When interest rates are lowered artificially by the government there is chaos. The business is tricked into borrowing to build a new factory or store when consumers aren’t saving and still want goods from the business and materials that the business needs to build the new place. This creates waste and causes things to become more expensive due to the demand increasing and supply staying the same. This then creates losses for consumers and businesses.

The primary problem with prohibition of drugs is that it is hard to enforce because it is a victimless crime. This means the person doing drugs is not directly harming others. The government will put officers and money into punishing people on drugs rather than punishing robbers and murderers. This means there will be more people getting robbed and murdered.