Exam 5: Understanding, Outlining, and Summarizing Longer Readings

Like Adam Smith's book The Wealth of Nations (1776), John Maynard Keynes's book The General Theory of Employment, Interest and Money (1936) revolutionized economic thought and remains influential today.However, when references are made to Keynes or Keynesian thinking, most people have one thought in mind: Keynes's belief that the government should play a role in the economy and hire the unemployed when jobless figures rise too high.Although Keynes, like Milton Friedman, supported the notion of self-interest playing a role in the marketplace, he believed that during times of high unemployment, the government had to step in and create jobs.When allusions to Keynes come up today, the role of government intervention in the economy is almost always what the writer or speaker has in mind, for example, "Keynesian myths persist today largely because of the mistaken belief that economic slowdowns are a result of flaws in the free-market system, when in fact they are the result of government intervention." Summary

Read each excerpt.Then write the letter of the better summary, explaining why you chose it in the blanks that follow 1.Invisible hand of the market The first two words of this phrase, "invisible hand," come from the book The Wealth of Nations (1776) written by the Scottish economist Adam Smith.The rest of the phrase was added over time.Smith viewed self-interest as the "invisible hand" that would automatically create a balance between supply and demand, making any other kind of regulation or control unnecessary.Smith only uses the phrase once in his book.As a matter of fact, he was never a total believer in the idea of the market automatically regulating itself through the forces of supply and demand.However, the phrase seems to have taken hold in the imagination of many.It survives to this day and is used whenever anyone wants to argue for or against the notion that those in business can do without outside regulation or interference."Like many in corporate management, she was opposed to government regulation, believing instead in the invisible hand of the market." Summary