Whatever Happened To Penny Candy Ch 5

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Questions and Answers

What does the phrase 'I want! I want!' actually imply according to the content?

A desire for government intervention

A call for increased taxation (correct)

An inclination towards charity

Demand for more goods and services

Which entity is mentioned as contributing to the inflation process today?

The stock market

International organizations

Banks and Federal Reserve (correct)

Local governments only

What relationship does the author suggest exists between inflation and ethics?

Inflation can be solved through ethical practices. (correct)

Inflation is caused by lack of ethics in politics.

Inflation is solely a financial issue.

Ethics have no impact on inflation whatsoever.

According to the author, what is the main reason politicians can win elections?

Their skill at conveying 'The Lie' Signup and view all the answers

Which statement best captures the author's view of government inflation?

Inflation is a universal issue faced by all nations. Signup and view all the answers

What does TANSTAAFL stand for in the context of the provided letter?

There are no benefits without costs Signup and view all the answers

Which of the following is suggested as a method to combat inflation?

Promoting ethics Signup and view all the answers

Why do dictators tend to inflate the money supply instead of raising taxes?

They fear being overthrown or assassinated. Signup and view all the answers

What motivates politicians in a democracy to promise more to voters?

They need to get elected by offering what people want. Signup and view all the answers

What is the main consequence of increasing the money supply by governments?

Inflation that makes money worth less. Signup and view all the answers

What is the relationship between government promises and inflation in a democracy?

Unfulfilled promises typically require governments to print more money. Signup and view all the answers

In modern economies, how do politicians inflate money rather than simply using printing presses?

By working through banks and the Federal Reserve. Signup and view all the answers

What motivates voters to elect a candidate in a democratic system?

The promises that align with the voters' desires. Signup and view all the answers

What happens to prices when inflation occurs as a result of increased money supply?

Prices rise accordingly. Signup and view all the answers

What is the main reason that voters might turn against a politician in the next election?

Not delivering on promised projects. Signup and view all the answers

Study Notes

Government Inflation

All governments inflate, regardless of system (democracy or dictatorship)
Exceptions are insignificant and short-lived
Dictatorships inflate due to fear of revolution; avoiding tax increases leads to money printing.
Democracies inflate due to election promises and limited voter demands
Politicians promise popular items (schools, highways, hospitals, etc.) to gain votes but can't fund them through taxes.
Result: money printing and inflation.
Modern politicians use banks and the Federal Reserve to inflate, but the effect is the same - increased money supply devalues it, raising prices.

Election and Inflation

Politicians promise voters desirable things to win elections
Voters elect the candidate who seemingly offers the most
Politicians face a dilemma: fulfill promises without raising taxes.
Politicians choose money printing to fund promises without directly increasing taxes on voters.
Politicians use banks and Federal Reserve to inflate, which raises prices.

Inflation and Ethics

Inflation is linked to ethical issues
"The Lie" – candidates promise what voters want, implying someone else will pay for it.
Solving inflation requires ethical solutions (acknowledging how promises impact everyone).

Further Information

The text recommends Harry Browne's How You Can Profit from the Coming Devaluation for further understanding of banking and Federal Reserve inflation mechanisms (first 100 pages).
Inflation, like taxes, is a consequence of large, powerful government.
The underlying principle of inflation, like "I want! I want!", is the cry of "Tax me! Tax me!"

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Description

This quiz explores the relationship between government inflation and electoral promises. It highlights how both democracies and dictatorships resort to money printing to meet voter expectations without raising taxes. Understand the implications of such fiscal policies on the economy.