Chapter 6 Test

Question 1

What economic system prevailed in Europe from the 1500s to the 1700s?

Answer 1

Mercantilism

Question 2

What was the major economic goal of European countries from the 1500s to the 1700s?

Answer 2

Increase their holdings of gold and silver

Question 3

According to Adam Smith, what were two flaws in mercantilist economic policy?

Answer 3

• Nation would exploit its resources to accumulate gold and silver at the expense of its own people
• The aggressive actions of the mercantilism nation would create enemies

Question 4

According to Adam Smith, why would a laissez-faire economic policy work?

Answer 4

People will seek to meet the needs of others in a way that they would profit themselves

Question 5

The answers to what two questions can determine whether a nation is capitalistic or socialistic?

Answer 5

1. ) Who owns the factors of production?

2. ) Who answers the three economic questions?

Question 6

Name two economic principles of capitalism supported by Scripture and give a reference for each.

Answer 6

• Private Ownership of property - Acts 5:4, Exodus 20:17

- Principle of individual accountability - Luke 12:47-48

Question 7

Which economic system is closest to Adam Smith’s writings?

Answer 7

Classic Liberal Capitalism

Question 8

Identify the five points of mercantilism.

Answer 8

Exploration, trade, domestic manufacturing, colonization, alliances/treaties.

Question 9

What is the full title of Adam Smith’s landmark economic treatise?

Answer 9

Inquiry into the nature and causes of the wealth of nations

Question 10

According to Adam Smith’s philosophy of laissez-faire liberalism, what are the two keys to the economic prosperity of a nation?

Answer 10

Limited government and personal responsibility

Question 11

What is liberalism according to the classical definition?

Answer 11

Liberty

Question 12

What did Adam Smith declare to be the three functions of government?

Answer 12

1. ) To protect its citizens from foreign invasion
2. ) To protect the rights from infringement by others
3. )To provide public goods

Question 13

Why is radical capitalism unscriptural?

Answer 13

It denies the legitimacy of government that God ordained

Question 14

What kind of economy does the United States have?

Answer 14

State Capitalism

Question 15

Socialism is marked by the government’s nationalizing which vital industries?

Answer 15

Transportation, Communication, energy, financial markets, health care

Question 16

To an economist, what is meant by the phrases standard of living and real income?

Answer 16

1. ) Standard of living is the measure of the quality life of a country
2. ) Real income is when a person’s income can actually buy

Question 17

Identify two potential weaknesses of capitalism.

Answer 17

• Exploitation of workers for business
• love of money
• materialism
• laying up treasures on earth instead of heaven
• prosperity or blessings often causes humans to forget about God