Question

True or false: "unlike the mercantilists who argued that with free trade, international specialization of resources in production leads to an increase in world output that can be shared by trading partners, smith maintained that a nation could only gain at the expense of other nations because not all nations could simultaneously run trade surpluses."

Answer 1

The statement is false because Adam Smith believed that trade could be mutually beneficial for all nations involved and that wealth was not a finite resource. He advocated for free trade based on comparative advantage and opposed governmental interference in the economy.

Step-by-step explanation:

The statement is false. Adam Smith, a key figure of the Enlightenment, disagreed with mercantilists on wealth creation through trade. Unlike mercantilists, who believed in maximizing wealth by running trade surpluses, Smith argued that wealth was not a fixed asset and that all nations could prosper simultaneously. He believed in the concept of comparative advantage, where countries should specialize in producing goods where they have an advantage and engage in free trade. This would lead to an increase in world output and mutual benefits for all trading partners, not at the expense of each other. Additionally, Adam Smith opposed government intervention in the economy, which he saw as detrimental to competition and innovation.

Answer 2

The statement is false. International specialization of resources will do nothing but benefit world output. Different countries have access to different natural resources and different abilities of production. If each were to specialize in their resources and share them, and specialize in their productive abilities, the countries would all be able to benefit in trade.