Final answer:
The economic theory termed mercantilism drove European nations to trade competition by emphasizing the importance of exporting more than importing, amassing gold and silver to increase wealth, and imposing policies to protect domestic industries.
Step-by-step explanation:
The economic theory that led to trade competition as European nations sought to export more than they imported is known as mercantilism. Under this theory, wealth was measured in gold and silver, and economic power was believed to be gained by maximizing exports and minimizing imports to increase a nation's store of precious metals.
Mercantilist policies led governments to impose tariffs, grant monopolies, and subsidize domestic industries to prevent foreign competition. These strategies were intended to promote a nation's own industries by making imported goods more expensive and less attractive compared to locally produced items. Colonies played a key role because they provided both the raw materials for industries in the home country and a captive market for its finished goods.
However, this system also had detractors such as David Hume and Adam Smith, who argued against the mercantilist view, promoting instead the idea that wealth could be increased for all through free trade and that an economy should be regulated by competition rather than government intervention.