Which economic principle advocates minimal government interference in the market?

• A. Laissez-faire
• B. Mercantilism
• C. Socialism
• D. Keynesianism

Answer: (A)

The main idea tested is laissez-faire: the view that the economy works best when the government stays out of economic affairs and markets are free to allocate resources through supply and demand with minimal intervention. Proponents argue that allowing individuals and businesses to respond to prices and incentives leads to efficient production, innovation, and better consumer choices, with the government’s role limited to enforcing laws, protecting property rights, and providing essential public goods.

This stands in contrast to mercantilism, which argues for an active government role—using tariffs, subsidies, and regulations to build national wealth and power. Socialism centers on public or collective control of major industries and planning aspects of the economy. Keynesianism supports active policy to manage economic fluctuations, using government spending and monetary measures to stabilize demand.