Answer to Question #308952 in Macroeconomics for Kinza Tariq

Question

1. How would the classical views on the creation of wealth differ from those of the mercantilists?

Answer 1

How would the classical views on the creation of wealth differ from those of the mercantilists?

The mercantile system promotes exports while discouraging imports. Mercantilists think that a country's wealth is found in precious metals (gold and silver), and that accumulating a big number of these metals is vital. They thought that the more precious metals you exported and paid with, the wealthier you were. Mercantilists also thought that import and export should be regulated by the government. Classical economists, in contrast to mercantilists, stressed the importance of actual elements in determining the "wealth of nations."

The Classical viewpoint differs from that of the mercantilists in that they believed in a free market with no government involvement, whereas the mercantilists felt that the government should regulate imports and exports.

Money, according to the classical view, has no intrinsic worth and serves simply as a means of exchange. It is only useful for acquiring commodities and services. While mercantilists believe that money is the source of a country's wealth, gold and silver were used in this case.