Which one of the following was recognized as 'invisible hand' by Adam Smith?
- A.Government
- B.Market/Price Mechanism
- C.Judiciary
- D.Legislature
Correct answer
Explanation
The correct answer is B, Market/Price Mechanism. Adam Smith used the "invisible hand" for the way free markets, guided by prices, turn private self-interest into a benefit for society.
Adam Smith, the Scottish economist often called the father of economics, wrote The Wealth of Nations in 1776. He argued that when each buyer and seller pursues their own gain, the movement of prices signals where goods are scarce or plentiful, so resources flow to their best use without any central direction. This self-regulating price mechanism is the invisible hand. The idea became the basis of laissez-faire, the view that the state should interfere as little as possible in the economy.
A is wrong: the government is a visible hand; Smith wanted its role in the economy kept small.
C is wrong: the judiciary enforces contracts and laws but does not allocate resources.
D is wrong: the legislature makes laws; it is not the market force Smith described.
Exam tip: invisible hand = price mechanism, Adam Smith, The Wealth of Nations (1776), laissez-faire.
Practice Questions
View allThe widespread deaths due to starvation and epidemics are the characteristics of
- A.famine
- B.poverty
- C.civil war
- D.malnutrition
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A famine is marked by widespread deaths from starvation and from epidemics, which spread through contaminated water, rotting food and bodies weakened by hunger.
Read the full explanation →In India, which of the following can be considered as public investment in agriculture?
1. Fixing Minimum Support Price for agricultural produce of all crops
2. Computerization of Primary Agricultural Credit Societies
3. Social Capital development
4. Free electricity supply to farmers
5. Waiver of agricultural loans by the banking system
6. Setting up of cold storage facilities by the governments
Select the correct answer using the code given below :
- A.1, 2 and 5 only
- B.1, 3, 4 and 5 only
- C.2, 3 and 6 only
- D.1, 2, 3, 4, 5 and 6
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Public investment means government spending that creates lasting assets or capacity, while support prices, free power and loan waivers are subsidies or transfers.
Read the full explanation →Consider the following activities :
I. Production of crude oil
II. Refining, storage and distribution of petroleum
III. Marketing and sale of petroleum products
IV. Production of natural gas
How many of the above activities are regulated by the Petroleum and Natural Gas Regulatory Board in our country?
- A.Only one
- B.Only two
- C.Only three
- D.All the four
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The Petroleum and Natural Gas Regulatory Board covers the downstream chain, refining to sale, but not the production of crude oil and natural gas.
Read the full explanation →Which one of the following equals Personal Disposable Income ?
- A.Personal Income - Direct taxes paid by households and miscellaneous fees, fines, etc.
- B.Private Income - Saving of Private Corporate Sectors - Corporation Tax
- C.Private Income - Taxes
- D.Total expenditure of Households - Income Tax - Gifts received
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In national income accounting the steps run from private income to personal income to personal disposable income. Private income is the factor income of the private sector plus transfers.
Read the full explanation →With reference to India, consider the following pairs:
Organization : Union Ministry
I. The National Automotive Board : Ministry of Commerce and Industry
II. The Coir Board : Ministry of Heavy Industries
III. The National Centre for Trade Information : Ministry of Micro, Small and Medium Enterprises
How many of the above pairs are correctly matched?
- A.Only one
- B.Only two
- C.All the three
- D.None
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Each organisation is paired with the wrong ministry. The National Automotive Board works under the Ministry of Heavy Industries; it supports the automobile sector with testing and certification work and helps run schemes for the industry.
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