AnswersHSA 26-27 EconomicsEconomic Policy: Influential Theories

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
11

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.
12

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.
13

The graph shows how individuals affect economic growth.

Question illustration
A
They work in their own self-interest.
B
They work as part of a unified group.
C
They work to influence the money supply.
D
They work to influence the economy.
14

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.
15

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
16

Which occurred during the Great Depression? Check all that apply.

A
increased aggregate demand
B
new forms of money
C
falling wages
D
increasing prices
E
plummeting growth
F
surging unemployment
17

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
18

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.
19

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.
20

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

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