Question

Classic liberal trade theory holds the view that:"

a. Governments should heavily regulate international trade.
b. Trade should be left entirely to the free market without government intervention.
c. Trade should only occur between neighboring countries.
d. Trade should focus solely on raw materials.

Answer 1

Classic liberal trade theory promotes trade liberalization and the free market, contrary to the mercantilist emphasis on government regulation and protectionism. Adam Smith's views underpin this theory, which suggests that government intervention in trade should be minimal.

Step-by-step explanation:

Classic liberal trade theory, as proposed by thinkers like Adam Smith, advocates for a laissez-faire approach to international trade. This means that, according to classic liberalism, trade should be left entirely to the free market without government intervention, which allows for the benefits of trade liberalization. This view is opposite of mercantilism, which promoted government regulation to protect domestic industries. Adam Smith argued against mercantilist policies, suggesting that trade liberalization benefits individuals and countries by allowing the forces of supply and demand to govern the market. Moreover, trade policies have evolved over time, with international agreements like those facilitated by the World Trade Organization (WTO) aiming to reduce protectionism and promote free trade.