Question

drag each label to the correct location on the table.
match each economist to the scenario that exemplifies his economic philosophy.
keynes hayek
a small caribbean island’s economy depends
on tourism. however, in recent times, it has seen
much less economic activity. its government decides
to let the market correct the situation.
flour prices have risen in a country where bread is a
staple part of the diet. as a result, bread prices have
risen tremendously. in an effort to make bread affordable
for its citizens, the government has limited how much
bakers can charge for bread.

Explanation:

To solve this, we analyze the economic philosophies of Keynes and Hayek:

1. Analyze Hayek’s Philosophy:

Hayek advocated for laissez - faire (free - market) economics, believing that government intervention in the market should be minimal and that the market should self - correct. In the first scenario, “A small Caribbean island’s economy... government decides to let the market correct the situation”, the government is not intervening and is letting the market work. So this scenario matches Hayek.

2. Analyze Keynes’s Philosophy:

Keynes supported government intervention in the economy to address market failures or issues like affordability. In the second scenario, “Flour prices have risen... government has limited how much bakers can charge for bread”, the government is intervening (price control) to make bread affordable. So this scenario matches Keynes.

Final Matches:

• “A small Caribbean island’s economy depends on tourism... government decides to let the market correct the situation” → Hayek
• “Flour prices have risen in a country... government has limited how much bakers can charge for bread” → Keynes

Answer:

• First scenario (Caribbean island): Hayek
• Second scenario (bread price control): Keynes