ECS3705 Assignment 1 Semester 2 2025 (Answer Guide) - Due 25 September 2025 QUESTION 1 The Mercantilist school of thought, which influenced European economic policy between the sixteenth and eighteenth centuries, was one of the earliest systematic attempts to understand and manage economic activity. At the core of Mercantilism was the belief that national wealth was best measured by the quantity of precious metals, especially gold and silver, held within a country (Magnusson, 2015). Unlike modern economic theories, Mercantilists did not view wealth as something that could expand indefinitely through innovation and production. Instead, they believed that wealth was limited, and that nations had to compete with one another to secure their share of global resources (Ekelund & Hébert, 2014). This worldview created a highly competitive and protectionist economic environment where each state sought to maximise its own gains while minimising those of its rivals. In relation to wealth creation, Mercantilists emphasised the accumulation of bullion as the primary means of strengthening a nation’s economy and ensuring political stability. They argued that wealth could be created by achieving a favourable balance of trade, meaning that exports shoul
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