Final answer:
Mercantilism is the economic policy by which a country regulates its colonies' trade to ensure a favorable balance of trade, aiming to accumulate wealth through a controlled market system involving tariffs and customs charges.
Step-by-step explanation:
The policy a country is using when it regulates its colonies' imports and exports to produce a favorable balance of trade is known as mercantilism. This protectionist economic principle was driven by the aim to accumulate wealth, particularly silver and gold, by controlling the market through taxes and customs charges. Colonial mercantilism involved the colonies providing raw materials to the mother country at low prices, and in return, the mother country would manufacture goods and sell them back to the colonies at higher prices.
Mercantilist policies included high tariffs on imported goods, restrictions such as quotas or even bans on certain imports to protect domestic industries, and often involved granting monopolies over domestic production to specific firms. Governments at the time believed that wealth was finite and that their power depended on the wealth they could accumulate through a favorable balance of trade. As such, colonies played a crucial role in this system, acting primarily to increase the mother country's wealth through controlled trade.