Business and Government — Test

Question 4 • Economics

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

Answer

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

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

Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.

Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea.

Explanation

Keynes argued that government should intervene in the economy, especially by increasing spending during downturns to support demand and employment. Smith is associated with the “invisible hand,” the idea that individuals pursuing their own interests can help guide markets, generally with limited government interference. Therefore, C best summarizes their difference.

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