Advanced Placement US History (AP US History) Practice Exam

Which ideology suggests that government should not interfere in the free market?

1. Socialism

2. Laissez-faire

3. Capitalism

4. Mercantilism

The correct answer is: Laissez-faire

The ideology that suggests the government should not interfere in the free market is characterized as laissez-faire. This term, which is French for "let do" or "let go," supports minimal government intervention in economic matters, advocating that the free market operates best when individuals can pursue their economic interests without regulatory constraints. Laissez-faire economics is deeply rooted in classical liberalism and emphasizes individual liberty, voluntary exchanges, and competition, which are believed to foster innovation and efficiency in the market. Other economic systems listed have different principles regarding government involvement. For instance, socialism involves government control or regulation over the means of production to promote social welfare and address inequalities, which contrasts with the idea of a hands-off approach. Capitalism, while it promotes private ownership and free markets, can still involve varying degrees of government involvement, especially to address market failures or to regulate monopolies. Mercantilism, on the other hand, is an economic theory that promotes government regulation of a nation’s economy for augmenting state power, particularly through a favorable balance of trade, and is fundamentally opposed to the laissez-faire approach.