XIII. INTEREST ON FARM LOANS 



QUESTIONS 



i. When the farmer makes a business loan, does he do so because 

 he expects it to add to the productivity of his farm enterprise ? Is 

 money productive ? How does he expect to make the money a means 

 to increased production ? 



2. Does his willingness to pledge certain security and obligate 

 himself to make certain interest payments depend upon his estimate 

 of the technical possibilities of certain capital-goods ? 



3. Would it be correct to say that the demand for capital depends 

 upon the opportunities for productive use of certain definite capital- 

 goods in conjunction with the other factors of production ? 



4. Does the borrower know that these uses will actually prove 

 profitable? Upon what, then, does he base his decision to demand 

 a certain amount of capital at a given interest rate ? 



5. In general, should it be said that the demand for agricultural 

 capital in the United States has been strong? Why? What effect 

 has this tended to have upon interest rates ? 



6. Is the tendency for the demand for capital in agriculture to 

 increase or decrease in recent years ? Why ? 



7. If some forms of capital-goods are more effectual in increasing 

 the productivity of agricultural labor, which are the ones which deter- 

 mine the farmer's demand for capital ? 



8. Are our general principles of diminishing utility and marginal 

 uses applicable here ? May changes in technique bring about sudden 

 readjustments of our demand for capital and of the wants which fall 

 along the margin ? Give several recent illustrations. 



9. Does the principle of substitution enter into the determination 

 of the farmer's demand for capital ? How ? 



10. When we speak of marginal demand for capital, do we admit 

 that there are other less pressing demands for capital which are pre- 

 cluded from any active part in the rate-making process? What is 

 the force that excludes these submarginal desires for capital and 

 locates the particular margin on our demand schedule ? 



1 1 . Is capital ever a free good ? Why ? 



12. Does capital have a cost of production? What is its cost of 

 production ? 



13. Analyze as carefully as you can the forces which make for a 

 high cost of producing agricultural capital; a low cost. Has the 

 supply of agricultural capital in America been abundant and cheap 

 or scarce and high ? Why has this been the case ? 



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