Enduring Understanding AP Macro Project
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- In the 1600s, John Baptiste proposed the idea of mercantilism, which allows the government to add subsidies to exports, place taxes on imports, and add regulations to products in order to regulate the economy.
- Here are 15 livres. Go grow more wheat!
- Cloth - 5 livres + government tax 2 livres
- Adam Smith
- As the economy shifted from farming to a capitalist economy, it became apparent that such regulations hindered the circulation of wealth and trade.
- However, Smith also believed that the government still has some responsibilities like capping interest rates, protecting war industries, and supporting equal wages in order to keep the economy functioning.
- Crops sold on market
- That's a lot of friction...
- Products must meet government requirements
- Farmers produce more crops
- Government Tax on imported goods, higher prices
- Goods sold to corporations
- GovernmentSubsidy
- However, the economy became too unregulated, and corporations could establish monopolies, which stifled competition, allowed them to profit off the poor, and grow powerful enough to influence political decisions.
- I know...
- Owned by Fancy Wheat
- 10 livres per batch!
- Protective Tariffs raised once again!
- That's WAY too expensive!
- Guess cloth prices will increases AGAIN.
- Owned by Fancy Wheat
- Adam Smith popularized the idea of laissez-faire or limited government involvement in the free market. Everyone acts out of self-interest and tries to maximize their profit. But competition allows prices to stay reasonable. This also means the market will autonomously adjust to disruptions.
- Corn Supply Shortage!
- Wheat for 3 livres!
- Guess I'll import more corn and take advantage of the high price!
- Wheat for 5 livres!
- "..the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged..."
- (quote from Wealth of Nations)
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