an economic theory that emphasized the importance of stockpiling gold and silver to the economic power of a nation, mercantilists regulated the economy by encouraging exports and restricting imports
regulations passed by Parliament to enforce trade regulations in all colonies: all trade had to go through British or colonial merchants and be shipped in British or colonial ships with the end goal to generate large exports from England with few imports
the philosophy of a free market economy in which the government serves only to create and acceptable environment in which to make exchanges
an economic model advanced by Adam Smith in which the forces of individual self-interest regulate the economy, eliminates the need for most government interventions
trade between two parties
role of money
money facilitates exchange by eliminating the necessity for a "coincidence of wants" functioning as a generally acceptable medium for exchange
coincidence of wants
when two parties each possess something desired by the other, promoting an exchange
the economic practice of focusing resources on production of one or a few goods
when buyers and sellers have no influence of price and terms of exchange
role of prices and profits
prices determine the quantity of goods supplied, as profits increase, the number of suppliers and resources for making the good will increase
when the amount demanded is greater than the amount supplied
when the amount supplied is greater than the amount demanded
law of supply
as the price of particular good or service rises, suppliers will produce more of that good or service
law of demand
as the price of a particular good or service rises, individuals will buy less of that good or service
the price at which the amount demanded is equal to the amount supplied
the invisible hand
Adam Smith's term for the natural self-regulation of a market economy driven by self-interest and efficiency
policy in which there is little or no interference with exchange, trade, or market prices by the government
Scottish philosopher and economist who wrote The Wealth of Nations, considered the father of modern economics
How do the goals and methods of capitalism differ from mercantilism?
How does specialization and exchange increase the standard of living?
In what specific ways does competition shape our economy today? Has self-interest of personal virtue proved to be the motivation for most of our decisions today?
What five things should government do to ensure that a free market economy remains effective?
Compare the current economic structure of the United States with the vision described by Adam Smith's Wealth of Nations. In what ways are existing conditions similar and/or different to what Smith envisioned?
In what way was the American Revolution related to economic interests?