Which of the Following Is Most Important for Long-Run Growth

question 106

Multiple Choice

Which of the following is most important for long-run growth and a healthy economy?

• A) a low rate of household savings and a high rate of consumption
• B) a high rate of both savings and consumption
• C) a high rate of government expenditures financed by borrowing
• D) high tax rates and budget surpluses

---

Definitions:

Market System

An economic system whereby decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individuals working for their own gain unintentionally benefit society.

Wealth of Nations

A seminal book by Adam Smith that examines how nations achieve wealth and economic growth.

Adam Smith

An 18th-century Scottish economist and philosopher, best known for his book "The Wealth of Nations," which lays the foundation for classical economics.