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The great 18th-century economist Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” Explain how each of the three conditions Smith describes would promote economic growth. To find additional study resources, visit cengagebrain.com, and search for “Mankiw.”

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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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Section
BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 12, Problem 9PA
Textbook Problem
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The great 18th-century economist Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” Explain how each of the three conditions Smith describes would promote economic growth.

 To find additional study resources, visit cengagebrain.com, and search for “Mankiw.”

To determine
ValidatingAdam Smith’s conditions that promote economic growth.

Explanation of Solution

Peace would promote economic growth as it is an indication of respect to property rights. Violence, conflicts, and threats of a revolutionary government reduce the domestic resident’s tendency to save or invest. Also, it lowers incentive for foreign investment in the country.

Easy taxes enable citizens and businesses to retain a greater proportion of their earned income...

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