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.