AnswersHSA 26-27 EconomicsEconomic Policy: Influential Theories

Economic Policy: Influential Theories Answers

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1
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Friedrich Hayek believed that

A
behaviors could be easily predicted.
B
individuals could not influence the economy.
C
the economy is simply explained through behaviors.
D
the economy is too complicated to apply aggregates.
2
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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.
3

What are the goals when a government uses expansionary monetary policy? Check all that apply.increasing its money supply to boost the economydecreasing its money supply to slow the economyincreasing its money supply to speed business expansiondecreasing its money supply to curb business expansiondecreasing its interest rates to increase investment spending

A
increasing its money supply to boost the economy
B
decreasing its money supply to slow the economy
C
increasing its money supply to speed business expansion
D
decreasing its money supply to curb business expansion
E
decreasing its interest rates to increase investment spending
4

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

A
Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.
B
Smith said government was the key to solving economic issues, while Keynes believed government should take a hands-off approach.
C
Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea.
D
Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.
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

Who was known as the "Father of Economics,” whose ideas of free markets inspired classical economic thinkers?

A
John Keynes
B
Milton Friedman
C
Friedrich Hayek
D
Adam Smith
7

free enterprisegovernment regulationKeynesian economicsmonetary policy

A
free enterprise
B
government regulation
C
Keynesian economics
D
monetary policy
8

producersconsumersgovernmentprices

A
producers
B
consumers
C
government
D
prices
9

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
10

John Maynard Keynes believed that governments should increase spending in order to

A
increase prices.
B
increase supply.
C
decrease demand.
D
increase demand.
11

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.
12

A government might enact expansionary spending when it is trying to

A
increase aggregate demand for goods.
B
decrease aggregate demand for goods.
C
slow an economic expansion.
D
lower a budget deficit.
13

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.
14

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.
15

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

A
Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.
B
Smith said government was the key to solving economic issues, while Keynes believed government should take a hands-off approach.
C
Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea.
D
Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.
16

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

A
changes in the unemployment rate.
B
short-term changes in the economy.
C
long-term changes in the economy.
D
changes in the inflation rate.
17

John Maynard Keynes believed that governments should increase spending in order to

A
increase prices.
B
increase supply.
C
decrease demand.
D
increase demand.
18

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

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