Which one of the following was recognized as invisible hand by Adam Smith ?

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Q: 61 (CAPF/2020)

Which one of the following was recognized as ‘invisible hand’ by Adam Smith ?

question_subject: 

Polity

question_exam: 

CAPF

stats: 

0,79,16,7,79,6,3

keywords: 

{'invisible hand': [0, 0, 0, 1], 'adam smith': [0, 0, 2, 6], 'judiciary': [1, 0, 0, 2], 'legislature': [3, 0, 1, 3], 'government': [5, 0, 0, 1], 'market': [0, 0, 1, 0], 'price mechanism': [0, 0, 0, 1]}

The correct answer is option 2: Market/Price Mechanism.

Adam Smith, a renowned economist, introduced the concept of the "invisible hand" in his book "The Wealth of Nations." According to Smith, the invisible hand refers to the market or price mechanism.

The market or price mechanism operates through the interaction of supply and demand in a free market. Prices are determined based on the availability of goods or services and the desires of consumers. When the market is left to operate freely, without interference from the government or other external forces, it tends to allocate resources efficiently and maximize overall economic welfare.

The invisible hand metaphorically suggests that individuals, in pursuing their own self-interests, inadvertently promote the well-being of society as a whole. When individuals make decisions about what to buy and whom to sell to, they are guided by prices that reflect the supply and demand conditions in the market. These individual choices collectively shape the functioning of the entire economy.

Therefore, Smith recognized the market or price mechanism as the invisible hand that influences and guides economic activity towards desirable outcomes.