Economics Concepts Quiz

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Questions and Answers

What does Says' Law suggest about the relationship between supply and demand?

Says' Law posits that supply creates its own demand, meaning production naturally balances with consumer demand.

According to Keynesian economics, what should governments do during periods of recession?

Governments should increase spending to boost aggregate demand and stimulate the economy.

Who is a key proponent of supply-side economics, and what do they criticize?

Milton Friedman is a key proponent, and he criticizes Keynesian economics for causing economic instability through intervention.

What is the primary focus of classical economists regarding government intervention?

Classical economists argue for minimal government intervention, focusing on providing essential public services. Signup and view all the answers

How does Keynes view the relationship between saving and investment?

Keynes believes that saving and investment can become misaligned, leading to insufficient aggregate demand. Signup and view all the answers

What approach do monetarists advocate in terms of monetary policy?

Monetarists advocate for maintaining a constant and controlled money supply to avoid inflation. Signup and view all the answers

What happens during high inflation according to Keynesian economics?

During high inflation, the government should reduce spending to limit the money supply. Signup and view all the answers

What does the 'invisible hand' theory suggest in the context of classical economics?

The 'invisible hand' theory suggests that individual self-interest promotes overall prosperity in the economy. Signup and view all the answers

Flashcards

Classical Economics

An economic theory emphasizing free markets, price mechanisms, and minimal government intervention to maintain economic stability.

Say's Law

The principle that supply creates its own demand, implying production naturally balances with consumer demand.

Keynesian Economics

A theory advocating government intervention to manage aggregate demand and promote full employment by manipulating spending, in order to achieve economic goals.

Demand-Pull Inflation

Inflation caused by an excess of aggregate demand in an economy.

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Supply-Side Economics

An economic theory emphasizing the role of supply in economic growth and stability, advocating limited government intervention and focus on supply-side policies to keep a balanced, controlled monetary supply.

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