Question 1

During the 1980s and 1990s, the United States negotiated free trade agreements with Israel, Mexico, and Canada.

Accepted Answer

A) True 
 B)False

Question 2

The European Union has abolished restrictions on agricultural products traded internally.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following organizations is considered a regional trading arrangement?

Accepted Answer

A)  Organization of Petroleum Exporting Countries 
B)  North Atlantic Treaty Organization 
C)  Benelux Union 
D)  International Tin Agreement 
A)  Organization of Petroleum Exporting Countries 
B)  North Atlantic Treaty Organization 
C)  Benelux Union 
D)  International Tin Agreement

Question 4

Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward nonmember countries?

Accepted Answer

A)  European Union 
B)  Benelux Union 
C)  North Atlantic Treaty Organization 
D)  North American Free Trade Association 
A)  European Union 
B)  Benelux Union 
C)  North Atlantic Treaty Organization 
D)  North American Free Trade Association

Question 5

Customs union theory reasons that the formation of a customs union will decrease members' real welfare when the

Accepted Answer

A)  trade diversion effect exceeds the trade creation effect. 
B)  trade production effect exceeds the trade consumption effect. 
C)  trade consumption effect exceeds the trade production effect. 
D)  trade creation effect exceeds the trade diversion effect. 
A)  trade diversion effect exceeds the trade creation effect. 
B)  trade production effect exceeds the trade consumption effect. 
C)  trade consumption effect exceeds the trade production effect. 
D)  trade creation effect exceeds the trade diversion effect.

Question 6

Some trade creation was expected to occur as a result of the U.S.-Canada free trade agreement, since Canadian exports to the United States and U.S.exports to Canada were expected to expand at the expense of imports from Germany and Japan that faced trade restrictions.

Accepted Answer

A) True 
 B)False

Question 7

Advocates of the North American Free Trade Agreement hoped that a rise in Mexican exports to the United States would discourage labor migration from Mexico to the United States.

Accepted Answer

A) True 
 B)False

Question 8

At the Maastricht Summit of 1991, European Union negotiators called for the pursuit of a

Accepted Answer

A)  free trade area. 
B)  customs union. 
C)  common market. 
D)  monetary union. 
A)  free trade area. 
B)  customs union. 
C)  common market. 
D)  monetary union.

Question 9

In the United States, which group was most likely to be hurt by the North American Free Trade Agreement?

Accepted Answer

A)  unskilled labor 
B)  skilled labor 
C)  owners of capital equipment 
D)  owners of financial capital 
A)  unskilled labor 
B)  skilled labor 
C)  owners of capital equipment 
D)  owners of financial capital

Question 10

The implementation of the European Union has

Accepted Answer

A)  made it harder for Americans to compete against the Germans in the British market. 
B)  made it easier for Americans to compete against the Germans in the British market. 
C)  made it harder for Americans to compete against the Japanese in the British market. 
D)  made it easier for Americans to compete against the Japanese in the British market. 
A)  made it harder for Americans to compete against the Germans in the British market. 
B)  made it easier for Americans to compete against the Germans in the British market. 
C)  made it harder for Americans to compete against the Japanese in the British market. 
D)  made it easier for Americans to compete against the Japanese in the British market.

Question 11

Countries pursuing membership in the European Monetary Union (Eurozone) are supposed to meet "convergence criteria," which includes

Accepted Answer

A)  price instability. 
B)  high long-term interest rates. 
C)  sound governmental finances. 
D)  unstable exchange rates. 
A)  price instability. 
B)  high long-term interest rates. 
C)  sound governmental finances. 
D)  unstable exchange rates.

Question 12

The North American Free Trade Agreement was expected to benefit __________ the most.

Accepted Answer

A)  Canada 
B)  Mexico 
C)  Greenland 
D)  United States 
A)  Canada 
B)  Mexico 
C)  Greenland 
D)  United States

Question 13

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.

Figure 8.1. Effects of a Customs Union
 
-Referring to Figure 8.1, suppose Greece forms a customs union with France.Greece will import

Accepted Answer

A)  three calculators at a per-unit price of $30. 
B)  three calculators at a per-unit price of $40. 
C)  six calculators at a per-unit price of $30. 
D)  six calculators at a per-unit price of $40. 
A)  three calculators at a per-unit price of $30. 
B)  three calculators at a per-unit price of $40. 
C)  six calculators at a per-unit price of $30. 
D)  six calculators at a per-unit price of $40.

Question 14

American critics of the North American Free Trade Agreement thought that it could cause some U.S.companies to move to Mexico to benefit from

Accepted Answer

A)  lenient environment policies of the Mexican government. 
B)  high wages of Mexican workers. 
C)  low productivity of Mexican workers. 
D)  high corporate tax rates of the Mexican government. 
A)  lenient environment policies of the Mexican government. 
B)  high wages of Mexican workers. 
C)  low productivity of Mexican workers. 
D)  high corporate tax rates of the Mexican government.

Question 15

Regarding stages of economic integration, a free trade area

Accepted Answer

A)  goes beyond a customs union by including a common external tariff. 
B)  falls short of a customs union by excluding a common external tariff. 
C)  goes beyond a common market by including a common transportation policy. 
D)  goes beyond a common market by including a common agricultural policy. 
A)  goes beyond a customs union by including a common external tariff. 
B)  falls short of a customs union by excluding a common external tariff. 
C)  goes beyond a common market by including a common transportation policy. 
D)  goes beyond a common market by including a common agricultural policy.

Question 16

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

Accepted Answer

A) True 
 B)False

Question 17

In the short run, Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale affect more than offset the competition effect.

Accepted Answer

A) True 
 B)False

Question 18

Advocates of the North American Free Trade Agreement hoped that a (an) __________ in Mexican exports would __________ the migration of labor from Mexico to the United States.

Accepted Answer

A)  increase, increase 
B)  increase, decrease 
C)  decrease, increase 
D)  decrease, decrease 
A)  increase, increase 
B)  increase, decrease 
C)  decrease, increase 
D)  decrease, decrease

Question 19

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.

Figure 8.1. Effects of a Customs Union
 
-Consider Figure 8.1.The value of the trade diversion effect, resulting from the Greece/France customs union, equals

Accepted Answer

A)  $5. 
B)  $10. 
C)  $15. 
D)  $20. 
A)  $5. 
B)  $10. 
C)  $15. 
D)  $20.

Question 20

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

Accepted Answer

A) True 
 B)False

During the 1980s and 1990s, the United States negotiated free trade agreements with Israel, Mexico, and Canada.

The European Union has abolished restrictions on agricultural products traded internally.

Which of the following organizations is considered a regional trading arrangement?

Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward nonmember countries?

Customs union theory reasons that the formation of a customs union will decrease members' real welfare when the

Some trade creation was expected to occur as a result of the U.S.-Canada free trade agreement, since Canadian exports to the United States and U.S.exports to Canada were expected to expand at the expense of imports from Germany and Japan that faced trade restrictions.

Advocates of the North American Free Trade Agreement hoped that a rise in Mexican exports to the United States would discourage labor migration from Mexico to the United States.

At the Maastricht Summit of 1991, European Union negotiators called for the pursuit of a

In the United States, which group was most likely to be hurt by the North American Free Trade Agreement?

The implementation of the European Union has

Countries pursuing membership in the European Monetary Union (Eurozone) are supposed to meet "convergence criteria," which includes

The North American Free Trade Agreement was expected to benefit __________ the most.

American critics of the North American Free Trade Agreement thought that it could cause some U.S.companies to move to Mexico to benefit from

Regarding stages of economic integration, a free trade area

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

In the short run, Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale affect more than offset the competition effect.

Advocates of the North American Free Trade Agreement hoped that a (an) in Mexican exports would the migration of labor from Mexico to the United States.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 8: Regional Trading Arrangements

During the 1980s and 1990s, the United States negotiated free trade agreements with Israel, Mexico, and Canada.

The European Union has abolished restrictions on agricultural products traded internally.

Which of the following organizations is considered a regional trading arrangement?

Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward nonmember countries?

Customs union theory reasons that the formation of a customs union will decrease members' real welfare when the

Some trade creation was expected to occur as a result of the U.S.-Canada free trade agreement, since Canadian exports to the United States and U.S.exports to Canada were expected to expand at the expense of imports from Germany and Japan that faced trade restrictions.

Advocates of the North American Free Trade Agreement hoped that a rise in Mexican exports to the United States would discourage labor migration from Mexico to the United States.

At the Maastricht Summit of 1991, European Union negotiators called for the pursuit of a

In the United States, which group was most likely to be hurt by the North American Free Trade Agreement?

The implementation of the European Union has

Countries pursuing membership in the European Monetary Union (Eurozone) are supposed to meet "convergence criteria," which includes

The North American Free Trade Agreement was expected to benefit __________ the most.

American critics of the North American Free Trade Agreement thought that it could cause some U.S.companies to move to Mexico to benefit from

Regarding stages of economic integration, a free trade area

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

In the short run, Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale affect more than offset the competition effect.

Advocates of the North American Free Trade Agreement hoped that a (an) __________ in Mexican exports would __________ the migration of labor from Mexico to the United States.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Advocates of the North American Free Trade Agreement hoped that a (an) in Mexican exports would the migration of labor from Mexico to the United States.