Chapter 6 Test

Question 1

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

Answer 1

Increase their holdings of gold and silver

Question 2

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

Answer 2

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

Question 3

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

Answer 3

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

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

Question 4

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

Answer 4

Limited government and personal responsibility

Question 5

What is liberalism according to the classical definition?

Answer 5

Liberty

Question 6

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

Answer 6

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

Question 7

Why is radical capitalism unscriptural?

Answer 7

It denies the legitimacy of government that God ordained

Question 8

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

Answer 8

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 9

Identify two potential weaknesses of capitalism.

Answer 9

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

Question 10

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

Answer 10

Mercantilism