Unemployment will be low while consumer confidence is high. Once the prices rise to an inflationary level, companies will lay off people in order to make up for the over production of the goods that are not being sold at the high prices. Once the prices stabilize, the companies will be looking to higher workers and increase production. .

             Adam Smith believed that the government should only tax a necessary amount as not to create a deficit or surplus. The government should also spend only what it has. This would reduce the worry of government deficits, which many are concerned. The government would not keep a surplus either, which would keep the money in pockets of the citizens and enable them to put the money back into the market by spending it. Adam Smith was in favor of a progressive tax, that is each person gets taxed in proportion to their income. Smith also advocated a constant tax in which there were no tax cuts or hikes. That way the public would know how much they will have to spend and could balance their own budgets accordingly. .

             With the invisible hand, as long as consumers keep buying goods the economy will stay in check. Consumers will buy what they want at prices they feel are acceptable. Companies will produce these goods at the lowest possible price and in quantities based on public interest. .

             According To Adam Smith, the economy does not have to be intervened in because it works on its own merits. It will always balance itself because the consumers will react accordingly in case of inflation or recession. As long as people are motivated by profits, the invisible hand will guide the economy. After all, people knew little about economics for centuries and they all survived. .

             In the twentieth century, the world had a new viewpoint on economic policies. These ideas were brought by John Maynard Keynes. His ideas were contradictory to those of Adam Smith. Keynes was in favor of government intervention to keep the economy in check.