Question

In 1776 with An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith challenged the prevailing belief in mercantilist policies. The characteristic of capitalism that buyers and sellers will freely and willingly exchange in market transaction is called

A) profit motive.
B) economic freedom.
C) voluntary exchange.
D) entrepreneurial spirit.

Answer 1

The correct answer is C) Voluntary exchange

This is just another reason why Adam Smith is considered to be the father of modern economics.

Answer 2

The third alternative is correct (C).

According to Adam Smith, the driving force of capitalism is human ambition. The author says that the human being is naturally selfish and seeks to satisfy his needs. In this way, in seeking their needs, all men together contribute to the economy, involuntarily. It's what Smith calls the invisible hand.

The quest to satisfy human needs is initially given by the voluntary exchange of commodities, which is also called barter. For example, the potato farmer trades potatoes for beets with the beet famer, and both satisfy their needs.