Which is the main inference that can be drawn from Adam Smith's book The Wealth of Nations?

A) For an economy to work flawlessly, it shouldn't have to serve and moral goals.

B) The government must control a free-market economy, or economic problems will arise.

C) A free-market economy works well only without the government's interference.

D) Free trade will only hurt economies and should be stopped by governments.

The correct answer is C, as Adam Smith's theory states that a free-market economy works well only without the government's interference.

The Wealth of Nations describes how the division of labor and the expansion of trade generate greater production, wealth and social welfare, which is irrefutable: today no one, not even the most populist politician, discusses the benefits of the division of labor, which allows each one to specialize in the activities that he performs with more efficiency.

The higher productivity allows a person to generate goods that exceed their immediate needs, which results in an exchange of these items for other surpluses generated by someone else, which drives trade and allows us to enjoy satisfactions that we would not have in self-sufficiency (an economic term that means economic self-sufficiency).

Continuing with Smith's argument, higher production reduces the price of items in the market. Meanwhile, the expansion of trade expands demand, which ultimately translates into increases in production to satisfy it, making it necessary to hire more workers, which increases wages and thus the standard of living in a nation.

According to Smith, another factor that substantially increases labor productivity is investment in fixed capital, that is, infrastructure and machinery. This investment is initially made for the benefit of the shareholders but in the long term it also benefits the worker by increasing his productivity. On the other hand, if national savings are generated, resources are guaranteed to increase said capital and a virtuous circle is created that accelerates economic growth.

Regarding the role of the government, Adam Smith thinks that it should dedicate only to national defense and justice, as well as to create charities for the community and infrastructure, as long as these activities are not profitable for private investors. He adds that governments that spend beyond their income will generate debts with heavy burdens for future generations, and with a great vision indicated that, "huge debts oppress and possibly ruin the great nations of Europe."