Economic policy- influential theories

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The graph shows how individuals affect economic growth.

Which best describes how individuals help the economy grow?

They work in their own self-interest.

Milton Friedman argued that consumers are more likely to alter their behavior based on

long-term changes in the economy

How did Adam Smith’s economic ideas help the United States establish a free enterprise system? Check all that apply.

*they led to freedom of choice for consumers and producers *they led to open competition for consumers *they led to individual ownership of property

The graph shows an early economic theory known as the "invisible hand."

Which best describes the idea behind the "invisible hand"?

Individuals seeking their own self interest benefit the economy as a whole.

friedrich hayek believed that

the economy is too complicated to apply aggregates

Which best summarizes the philosophical difference between economists John Maynard Keynes and Adam Smith?

Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.

A government might enact expansionary spending when it is trying to

increase aggregate demand for goods

Why did Friedrich Hayek call expansionary spending dangerous?

He felt it could lead to inflation and poor decisions by consumers.

Monetarism plays a role in economic growth by

influencing the supply of money

the General Theory of Employment, Interest and Money was written by

John Maynard Keynes

Which occurred during the Great Depression? Check all that apply.

*falling wages *plummeting growth *surging unemployment

John Maynard Keynes believed that governments should increase spending in order to

increase demand

The graph shows Keynes’s theory of aggregate demand.

What is likely to happen if a new aggregate demand curve moves to the right?

prices and output would rise, and the equilibrium point will change

What are the goals when a government uses expansionary monetary policy? Check all that apply.

*increasing its money supply to boost the economy *increasing its money supply to speed business expansion

Milton Friedman led a new economic school of thought called


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