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Economic Policy: Influential Theories Answers

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

A
They led to freedom of choice for consumers and producers.
B
They led to fixed prices for consumers and producers.
C
They led to open competition for consumers.
D
They led to individual ownership of property.
E
They led to more government spending and increased demand.
F
They led to limited choice and communal ownership of property.
2
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The graph shows an early economic theory known as the "invisible hand."

Question illustration
A
Producers decide what to make for consumers, which guides the economy.
B
Individuals seeking their own self interest benefit the economy as a whole.
C
Government sets policy for producers and consumers, which guides the economy.
D
Consumers decide what they need and want to buy, which guides the economy.
3

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

A
John Maynard Keynes.
B
Adam Smith.
C
Milton Friedman.
D
Friedrich August von Hayek.
4

Milton Friedman led a new economic school of thought called

A
laissez faire.
B
monetarism.
C
price signaling.
D
the invisible hand.
5

The graph shows Keynes's theory of aggregate demand.

Question illustration
A
Prices and output would drop, and the equilibrium point will stay the same.
B
Prices would rise, and output would drop in the short run.
C
Prices and output would rise, and the equilibrium point will change.
D
Prices would rise, and output would drop in the long run.
6

Which occurred during the Great Depression? Check all that apply.increased aggregate demandnew forms of moneyfalling wagesincreasing pricesplummeting growthsurging unemployment

A
increased aggregate demand
B
new forms of money
C
falling wages
D
increasing prices
E
plummeting growth
F
surging unemployment
7

Monetarism plays a role in economic growth by

A
expanding government intervention.
B
influencing the supply of goods.
C
expanding government spending.
D
influencing the supply of money.
8

Which economist most likely would have agreed with the US government’s intervention during an economic crisis in 2008?

A
Friedrich von Hayek
B
Adam Smith
C
John Maynard Keynes
D
Milton Friedman
9

Why did Friedrich Hayek call expansionary spending dangerous?

A
He felt it could lower the money supply and cause deflation.
B
He felt it could lead to inflation and poor decisions by consumers.
C
He felt it could lead to deflation and poor decisions by consumers.
D
He felt it could lower available credit and cause a drop in prices.
10

free enterprisegovernment regulationKeynesian economicsmonetary policy

A
free enterprise
B
government regulation
C
Keynesian economics
D
monetary policy

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