Questions and Answers
How does monetarism play a role in economic growth?
Influencing the supply of money.
How do individuals help the economy grow?
They work in their own self-interest.
What is the philosophical difference between 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.
What does the term 'invisible hand' refer to in economic theory?
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When might a government enact expansionary spending?
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Who is known as 'the father of modern economics'?
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How did Adam Smith's economic ideas help the United States establish a free enterprise system? (Select all that apply)
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Why did Friedrich Hayek call expansionary spending dangerous?
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Who wrote 'The General Theory of Employment, Interest and Money'?
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Why did John Maynard Keynes believe governments should increase spending?
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Study Notes
Monetarism
- Monetarism influences economic growth by affecting the supply of money.
Role of Individuals
- Individuals contribute to economic growth by acting in their own self-interest, which drives demand and productivity.
Philosophical Differences
- John Maynard Keynes advocated for government intervention in economic issues, while Adam Smith supported a laissez-faire, hands-off approach.
Invisible Hand Theory
- The "invisible hand" concept signifies that individual pursuits of self-interest can lead to beneficial outcomes for the economy as a whole.
Expansionary Spending
- Governments may use expansionary spending to boost aggregate demand for goods and services during economic downturns.
Adam Smith's Influence
- Adam Smith is recognized as "the father of modern economics" and his ideas laid the groundwork for free enterprise systems in the United States by promoting:
- Freedom of choice for both consumers and producers.
- Open competition among businesses.
- Individual ownership and property rights.
Friedrich Hayek's Views
- Friedrich Hayek criticized expansionary spending as potentially dangerous due to the risks of inflation and irrational consumer behavior.
Key Contributions
- "The General Theory of Employment, Interest and Money" was authored by John Maynard Keynes, establishing foundational concepts in Keynesian economics.
Keynesian Economics
- John Maynard Keynes maintained that government spending is crucial for increasing demand and stimulating economic activity.
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Description
Test your knowledge on influential theories of economic policy with this quiz. Explore concepts like monetarism and the impact of individuals on economic growth. Understand the philosophical differences between key economists like Keynes and Smith.
