Economic Policy: Influential Theories Answers

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Milton Friedman led a new economic school of thought called

laissez faire.

monetarism.

price signaling.

the invisible hand.

Why did Friedrich Hayek call expansionary spending dangerous?

He felt it could lower the money supply and cause deflation.

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

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

He felt it could lower available credit and cause a drop in prices.

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

changes in the unemployment rate.

short-term changes in the economy.

long-term changes in the economy.

changes in the inflation rate.

Monetarism plays a role in economic growth by

expanding government intervention.

influencing the supply of goods.

expanding government spending.

influencing the supply of money.

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

Producers decide what to make for consumers, which guides the economy.

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

Government sets policy for producers and consumers, which guides the economy.

Consumers decide what they need and want to buy, which guides the economy.

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