Question

5. The ideas of Adam Smith and Karl Marx Adam Smith used the metaphor of the "invisible hand" to: Describe the benefits of free trade Describe how the profit motive undermines individuals' incentives to contribute to society Describe how the individual pursuit of self-interest works to promote the interest of the public as a whole Describe the appropriate, limited role of government What did Adam Smith consider the source of a nation's wealth?

Answer 1

• The ideas of Adam Smith and Karl Marx Adam Smith used the metaphor of the "invisible hand" to:

Answer: Describe the appropriate, limited role of government

Adam Smith’s “Invisible Hand” metaphor is used to explain how the marketplace has a self-regulating nature. This means that the resources are allocated automatically based on individuals acting in their interests.

Adam used this metaphor to defend that the government should have a limited role in intervening on the market. He believed that if the government did so it would ruin the market efficiency.

• What did Adam Smith consider the source of a nation's wealth?

Answer: Adam Smith wrote the book “The Wealth of Nations” in that book he explains that often people believed that gold and silver were the real wealth of the nations, but in fact, for Smith the wealth of the nations are the stream of goods and services that it creates, this today is called gross national product.