The "invisible hand" refers to

Question

BlackTom AI · Accepted Answer

The question asks about the meaning of the term the 'invisible hand.'
Option a: 'the control that large firms have over the economy.' This is incorrect because the concept of the invisible hand emphasizes decentralized decision-making by many buyers and sellers, not the power of large firms exercising control over the entire economy.
Option b: 'how the decisions of households and firms lead to desirable market outcomes.' This is the core idea of the invisible hand: through individuals pursuing their own interests in a competitive market, prices and resources allocate themselves efficiently without central direction.
Option c: 'government regulations without which the economy would be less efficient.' This misstates the concept; the invisible hand describes spontaneous market coordination, not necessarily outcomes driven by or dependent on government regulations.
Option d: 'how central planners made economic decisions.' This is contrary to the invisible hand; central planning implies deliberate top-down allocation, whereas the invisible hand relies on decentralized, voluntary exchanges in a free market.
Overall, option b correctly captures the essence of the invisible hand by highlighting how individual household and firm decisions collectively produce desirable market outcomes, while the other options introduce incorrect emphases or misunderstandings of the concept.

The "invisible hand" refers to

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