Question

Adam Smith's theory on capitalism began to replace which earlier economic theory held by France and Great Britain?

Answer 1

I am pretty sure the answer is D Mercantilism. 

Answer 2

The correct answer is D. Adam Smith's theory on capitalism began to replace mercantilism.

Mercantilism was a set of political ideas or economic ideas of great pragmatism that were developed during the sixteenth, seventeenth and the first half of the eighteenth century in Europe. It was characterized by a strong State intervention in the economy, coinciding with the development of monarchical absolutism.

It tended to the state regulation of the economy, the unification of the internal market, the growth of population, the increase of own production - controlling natural resources and foreign and domestic markets, protecting local production from foreign competition, subsidizing private companies and creating privileged monopolies-, the imposition of tariffs on foreign products and the increase of the money supply -through the prohibition of exporting precious metals and inflationary coinage-, always with a view to the multiplication of fiscal revenues. These actions had the ultimate goal of making the nation-state as strong as possible.

Mercantilism went into crisis in the late eighteenth century and practically disappeared by the mid-nineteenth century, with the emergence of new physiocratic and liberal theories.