Question

In his 1776 book The Wealth of Nations, Adam Smith argued that, in a free market, wages and the prices of goods would naturally balance themselves.

True
False

Answer 1

The statement is true; Adam Smith's The Wealth of Nations posits that in a free market, wages and prices balance naturally through the 'invisible hand' and competition, without significant government regulation.

Step-by-step explanation:

The statement is true: Adam Smith argued in his 1776 book The Wealth of Nations that, in a free market, wages and the prices of goods would naturally balance themselves. Smith believed in the concept of laissez-faire and the 'invisible hand' that effectively maintains the equilibrium in the market. He underscored the idea that individuals seeking to maximize their own good inadvertently contribute to the economic well-being of society as a whole. In a free market, competition would lead to the production of needed goods and services, drive down prices, and foster innovation. The market forces in this environment regulate themselves, creating a balance without the need for extensive government intervention.