Question

Adam Smith claimed that:

A. governments, not market forces, should determine the directions, volume, and composition of international trade.

B. a nation could trade advantageously if it had a comparative advantage.

C. market forces, not government controls, should determine direction, volume, and the composition of international trade.

D. customers' tastes are affected by income levels.

E. two of the above.

Answer 1

Adam Smith claimed that market forces, not government controls, should determine direction, volume, and the composition of international trade. He argued for trade based on comparative advantage and opposed government regulation of the economy.

Step-by-step explanation:

Adam Smith claimed that: C. market forces, not government controls, should determine direction, volume, and the composition of international trade.

Smith argued that economic gain for one nation did not mean economic loss for others. He believed that trade could be mutually beneficial for all if nations focused on their comparative advantages. Smith also opposed government regulation of the economy and instead advocated for competition and the influence of the market to determine trade.

Examples of Smith's ideas can be seen where countries specialize in what they produce best. For example, France produces high-quality cheese and wine, while Great Britain produces superior wool. By focusing on their comparative advantages in trade, both countries can benefit from access to the best products at the lowest costs.