ECS3705
Assignment 1
Semester 2
Due 25 September 2025
, ECS3705
Assessment 1
Semester 2 2025
QUESTION 1
(Mercantilist views on wealth creation, stimulation of wealth, and the role of
government)
Wealth creation
Mercantilists believed that the true measure of a nation’s wealth was not how many
goods people consumed, but how much gold and silver it owned. This meant that
countries had to export more than they imported to achieve a trade surplus. By doing
this, they ensured that gold and silver coins (bullion) flowed into their treasuries. In their
view, more money in the treasury meant greater national power, stronger armies, and
more influence over other nations. They also encouraged the production of
manufactured goods rather than just raw materials, because finished products could be
sold for higher profits abroad.
Wealth stimulation
To boost wealth, mercantilists promoted policies that encouraged domestic industries.
Governments often gave subsidies to manufacturers, encouraged people to use local
products, and placed high taxes (tariffs) on imported goods to protect local businesses.
They also supported exploration and colonisation, because colonies supplied raw
materials cheaply and acted as guaranteed markets for finished products. In addition,
mercantilists saw shipping and trade routes as vital so they invested in strong navies
and fleets. They also tried to keep interest rates low, so merchants could borrow money
cheaply and expand their trade.
Role of government
For mercantilists, the government was at the centre of economic life. They believed the
economy could not simply be left to “free markets”; instead, rulers had to plan, regulate,
and protect trade. Governments set up monopolies (for example, the British East India
Assignment 1
Semester 2
Due 25 September 2025
, ECS3705
Assessment 1
Semester 2 2025
QUESTION 1
(Mercantilist views on wealth creation, stimulation of wealth, and the role of
government)
Wealth creation
Mercantilists believed that the true measure of a nation’s wealth was not how many
goods people consumed, but how much gold and silver it owned. This meant that
countries had to export more than they imported to achieve a trade surplus. By doing
this, they ensured that gold and silver coins (bullion) flowed into their treasuries. In their
view, more money in the treasury meant greater national power, stronger armies, and
more influence over other nations. They also encouraged the production of
manufactured goods rather than just raw materials, because finished products could be
sold for higher profits abroad.
Wealth stimulation
To boost wealth, mercantilists promoted policies that encouraged domestic industries.
Governments often gave subsidies to manufacturers, encouraged people to use local
products, and placed high taxes (tariffs) on imported goods to protect local businesses.
They also supported exploration and colonisation, because colonies supplied raw
materials cheaply and acted as guaranteed markets for finished products. In addition,
mercantilists saw shipping and trade routes as vital so they invested in strong navies
and fleets. They also tried to keep interest rates low, so merchants could borrow money
cheaply and expand their trade.
Role of government
For mercantilists, the government was at the centre of economic life. They believed the
economy could not simply be left to “free markets”; instead, rulers had to plan, regulate,
and protect trade. Governments set up monopolies (for example, the British East India
