Adam Smith argued against mercantilism by claiming that market forces, not government controls, should determine the direction, volume, and composition of international trade. He advocated free, unregulated trade, in which each nation should specialize in making those goods it could produce most efficiently-goods for which it had an absolute advantage, either natural or acquired.

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Adam Smith Claimed

Question 70

Multiple Choice

Adam Smith claimed

A) that governments, not market forces, should determine the directions, volume, and composition of international trade.
B) a nation could trade advantageously if it had a comparative advantage.
C) that market forces, not government controls, should determine direction, volume, and the composition of international trade.
D) that customers' tastes are affected by income levels.
E) that trade surpluses were beneficial to countries and should be the focus of trade policy.

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