Adam Smith believed that people's pursuit of their own self-interests
a. tended to promote the general welfare
b. required the government's "invisible hand" to keep the economy running smoothly
c. might cause aggregate demand to be greater than aggregate supply
d. would increase the wealth of a nation, which was the quantity of gold and silver it owned
e. would decrease the wealth of a nation, which was its ability to produce goods and services
Ans: a. tended to promote the general welfare
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If a country operates on its PPF, it achieves production efficiency
Indicate whether the statement is true or false
A difference between the classical and new classical models is that
a. classical economists assumed that labor suppliers knew the real wage, while the new classical economists assume they form a rational expectation of the real wage. b. classical economists assumed that the money wage was flexible while the new classical economists assume it was fixed. c. new classical models do not assume perfect competition. d. labor supply in the classical model is a function of the real wage while labor supply depends on the money wage in the new classical model. e. both a and c.
The largest union today is the _____________________.
Fill in the blank(s) with the appropriate word(s).
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q 0 and that government purposely shifts the market supply curve from S to S 1 in diagram (a) on the left and from S to S 2 in
diagram (b) on the right. We can conclude that the government is correcting for:
A. negative externalities in diagram (a) and positive externalities in diagram (b).
B. positive externalities in diagram (a) and negative externalities in diagram (b).
C. negative externalities in both diagrams.
D. positive externalities in both diagrams.