What is it called when the government takes a "hands off" approach to businesses?

Laissez faire,  pretty sure it's what you're referring to. Laissez faire(a Frencheconomic term) is when a government allows a business to do whatever it wants to, and does not make a government intervention, which might potentially cause a market failure(when subsidies, tariffs or tax goes wrong and cause externalities). For example, if a product is just bad, it's neither a merit (beneficial) or demerit good to society, the government will just remain indifferent to it, hoping it will be removed from the market as nobody wants it.

The correct answer is a.f.c