5Mercantilism-Liberalism.pptx - ECONOMICS Economic theories...

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ECONOMICS
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Economic theories are about the creation and distribution of wealth Mercantilism Liberalism: o Physiocracy o Classical Liberalism
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Feudalism The 9th and 15th centuries Three classes: Nobility (The King and the Lords) Clergy (Men of Church) People (Farmers and Serfs) Merchants were unable to buy the most valuable means of production, which was Land controlled by the Nobility. Without being a part of Aristocracy, no body could own tangible property French Revolution (1789)- people should be able to own land
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Mercantilism (16th to 18th) Main question was ‘how a nation can become richer comparing to other kingdoms?’ (How to develop a country?) Three assumptions of mercantilists: o Nature of wealth: What is wealth? It is Money o What is money? Money is gold and silver (precious metals) o Total amount of money is fixed- (so slowly increasing therefore you could suppose it is fixed). For a nation becoming richer means others becoming poorer as the total amount is fixed. -Richer at the expense of others- trade is a kind of war, trade is zero sum game , no win-win situation Role of state in mercantilist system: State should interfere to trade: What does state do?
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Role of state in Mercantilist System How can we get money from outside? By export and import (when we export, we sell to other states- when we import we buy from other states) If export is bigger than import, you have money for the future of your national wealth- no trade deficit State should control trade to have more export less import-trade balance is crucial State is to encourage export and discourage import Should state encourage all kinds of export?- raw petroleum raw iron (cheap)?
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