Final answer:
Mercantilism is an economic theory where wealth is based on accumulating gold and silver, advocating for maximum exports and minimal imports to ensure a favorable trade balance. Mercantilist policies influenced European colonialism and aimed to benefit the home country. Critics later argued for free trade and against mercantilism's protectionist practices.
Step-by-step explanation:
Mercantilists believed that a nation's wealth was measured in its accumulation of gold and silver, and this wealth was seen as finite. To become wealthy, mercantilism posited that a nation must export as much as possible while minimizing imports to maintain a favorable trade balance. European nations adopted mercantilist policies, such as tariffs and monopolies, to protect domestic industries and prevent the outflow of precious metals to other countries.
The Mercantilist System encouraged the establishment of colonies to provide raw materials and serve as markets for the home country's goods. Nations like England, France, and the Netherlands pursued colonial expansion to extract resources and enforce trade regulations that would benefit their own economies. Critics of mercantilism, such as Adam Smith, later argued against its principles, highlighting the potential for mutual prosperity and the advantages of free trade.
During the sixteenth and seventeenth centuries, mercantilist theory drove European nations to establish colonies, both to prevent the need to purchase foreign resources and to ensure that colonies only traded with the home country. This was done to boost the nation's wealth and competitive advantage over other countries, as trade was controlled, and domestic production was favored over imports.