Practice Quiz

CLEP US Government

Category - Policy Processes

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When Adam Smith refers to “the invisible hand,” what is he talking about?
  1. The piece of the body connected to the invisible wrist.
  2. The uncontrollable forces of nature that affect the economy.
  3. The control that government exercises over the economy.
  4. The economic force that converts individual pursuit of personal profit into societal good.
  5. The fact that the basic cost of goods will always increase.
Explanation
Answer: D - When Adam Smith refers to “the invisible hand,” he is talking about the economic force that converts individual pursuit of personal profit into societal good. Adam Smith was an economic theorist who believed that the best way for the government to help people is for it to get out of the way economically. This is frequently called laissez faire economics, or the belief that the government should interact with the economy as little as possible. The idea is that if you allow individuals to pursue wealth, then they will make money and hire others to work for them, thus eventually almost eliminating poverty.
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