Advanced Placement US History (AP US History) Practice Exam

Which term refers to a government policy of minimal interference in economic affairs?

1. Interventionism

2. Regulation

3. Laissez-faire

4. Socialism

The correct answer is: Laissez-faire

The term that refers to a government policy of minimal interference in economic affairs is "Laissez-faire." This concept originated from French economic philosophy in the 18th century, emphasizing that economic success is most likely when individuals can operate freely in the marketplace without government interference. Laissez-faire advocates argue that an unregulated market leads to the most efficient allocation of resources, maximizes individual freedoms, and stimulates innovation and economic growth. In contrast, interventionism indicates a government policy of actively regulating and intervening in the economy, which is not aligned with the principles of minimal interference. Regulation involves establishing rules or laws to control specific economic activities, counter to the laissez-faire principle of non-involvement. Socialism reflects a system where the government plays a substantial role in controlling the means of production and overall economic planning, contradicting the laissez-faire approach focused on individual entrepreneurial freedom. Thus, "Laissez-faire" is the term that accurately captures the idea of minimal government interference in economic affairs.