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Mercantilism

Mercantilism Definition

Mercantilism is the economic theory that a nation's prosperity depended upon its supply of gold and silver, that the total volume of trade is unchangeable. Thus theory suggests that the government should play an active role in the economy by encouraging exports and discouraging imports, especially through the use of tariffs. Mercantilism is the economic policy that flourished in the early modern period are often referred to as mercantilism or as the mercantile system. These ideas stemmed from bullionism, a theory that precious metals equal wealth.

The term was coined by the economist Adam Smith in 1776, from the Latin word mercari, which means "to run a trade", from merx, meaning "commodity". It was initially used solely by critics, such as Smith.

Mercantilist tenets:

  • Nations are in a direct zero-sum competition with each other for wealth
  • Gold and silver bullion are synonymous with wealth





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