Deck 8: Regional Economic Integration

Question 1

A notable trend in the global economy in recent years has been the accelerated movement toward regional economic integration.

Answer 1

True
Explanation: The past two decades have witnessed an unprecedented proliferation of regional trade blocs that promote regional economic integration.

Question 2

In practice,the European Commission is responsible for implementing all aspects of EU law.

Answer 2

False
Explanation: The European Commission is responsible for implementing aspects of EU law,although in practice much of this must be delegated to member states.

Question 3

Europe has two trade blocs: the European Union and the European Free Trade Association.

Answer 3

True
Explanation: Europe has two trade blocs: the European Union (EU)and the European Free Trade Association (EFTA).Of the two,the EU is by far the more significant.

Question 4

According to economists,the benefits of regional integration are determined by the extent of trade diversion,as opposed to trade creation.

Question 5

A major benefit of regional free trade agreements is that all parties involved end up as winners.

Question 6

A common currency differentiates a common market from a customs union.

Question 7

The Treaty of Athens paved the way for the establishment of the European Community.

Question 8

Economic theories suggest that free trade and investment is a positive-sum game,in which all participating countries stand to gain.

Question 9

The votes that a country gets in the European Council are related to the size of the country.

Question 10

The movement toward regional economic integration has been most successful in South America.

Question 11

A political union addresses the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations of an economic union.

Question 12

GATT and the WTO cover all nontariff barriers that impede free trade.

Question 13

Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Question 14

Political considerations behind the formation of the European Community (EC)included the need for a united Europe to deal with the United States and the politically alien Soviet Union.

Question 15

The European Parliament is responsible for proposing EU legislation,implementing it,and monitoring compliance with EU laws by member states.

Question 16

Because of its primary role as a mere consultative body,the power of the European Parliament has declined in the recent years.

Question 17

A regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts.

Question 18

All member nations in a free trade area are required to arrive at common trade policies with regard to nonmembers.

Question 19

Assume that three countries form a common market.It can be expected that labor and capital are free to move between these countries.

Question 20

It is harder to establish a free trade and investment regime among a limited number of adjacent countries than among the world community.

Question 21

Even though the Andean Pact was signed in 1969,it took until the early-1980s for the agreement to really take off.

Question 22

The North American Free Trade Agreement (NAFTA)refers to the free trade area between Canada,Mexico,and the United States.

Question 23

A pan-European,euro-dominated capital market effectively decreases the range of investment options open to both individuals and institutions.

Question 24

An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods,services,and factors of production between each other is referred to as:

A)regional economic integration.
B)cross-cultural integration.
C)zoning agreement.
D)non-compete agreement.

Question 25

The Single European Act,adopted by members of the European Community in 1987,committed member countries to work toward establishing a single market.

Question 26

Which of the following observations is true?

A)The past two decades have witnessed a decline in the number of regional trade blocs.
B)World Trade Organization members are not required to notify the organization of any regional trade agreements in which they participate.
C)By entering into regional agreements,groups of countries aim to reduce trade barriers more rapidly than can be achieved under the auspices of the WTO.
D)The total number of regional trade agreements currently in force is around 40.

Question 27

Mercosur originated in 1988 as a free trade pact between Brazil and Argentina.

Question 28

The emergence of single markets presents the threat to companies that the business environment within each grouping will become more competitive.

Question 29

The emerging role of the European Commission in competition policy suggests the EU is increasingly unwilling to intervene and impose conditions on companies proposing mergers and acquisitions.

Question 30

Africa has the highest number of meaningful trading blocs in the world.

Question 31

On average,studies indicate that NAFTA's overall impact has been positive and significant.

Question 32

One of the most significant regional economic integration initiatives in Asia is the Association of Southeast Asian Nations (ASEAN).

Question 33

A major stumbling block in the creation of the Free Trade Area of the Americas is the requirement for South American countries to reduce agricultural subsidies and tariffs on agricultural imports.

Question 34

Which of the following is larger than the United States in economic terms?

A)Mercosur
B)EU
C)ASEAN
D)EFTA

Question 35

Which three countries implemented the NAFTA?

A)Panama,Mexico,and the United States
B)Canada,Brazil,and the United States
C)United States,Argentina,and Mexico
D)Canada,Mexico,and the United States

Question 36

Since its establishment in January 1,1999,the euro has steadily appreciated against the U.S.dollar,reaffirming the ability of the ECB to manage monetary policy within the euro zone.

Question 37

By adopting the euro,the EU has created the second most widely traded currency in the world after that of the U.S.dollar.

Question 38

Nowhere has the movement toward regional economic integration been more successful than in:

A)AfricA.
B)South America.
C)Middle-East.
D)Europe.

Question 39

The Asia-Pacific Economic Cooperation (APEC)is the largest and most successful economic grouping in Asia.

Question 40

The Andean Community now operates as a customs union.

Question 41

Which countries implemented an agreement known as Mercosur in 1991?

A)Chile,Mexico,Columbia,and Paraguay.
B)Argentina,Brazil,Paraguay,and Uruguay.
C)Chile,Brazil,Uruguay,and Columbia.
D)Mexico,Columbia,Paraguay,and Uruguay.

Question 42

Which term is used to refer to a group of countries committed to removing all barriers to the free flow of goods and services between each other,but pursuing independent external trade policies?

A)Free trade area
B)Customs union
C)Common market
D)Economic union

Question 43

Which of the following is true of a free trade area?

A)Factors of production are allowed to move freely between member nations.
B)Member nations are not required to have a common external trade policy.
C)Member nations are required to have a common currency.
D)Member nations are required to have a common monetary and fiscal policy.

Question 44

A(n)_____ has no barriers to trade between member countries,includes a common external trade policy,and allows factors of production to move freely between members.

A)Free trade area
B)Customs union
C)Common market
D)Exclusive economic zone

Question 45

The most enduring free trade area in the world is the:

A)Asian Free Trade Association.
B)MERCOSUR.
C)European Free Trade Association.
D)North American Trade Association.

Question 46

Three countries enter into an agreement to remove all tariffs and barriers for trade between them.They decide on a common trade policy with regard to nonmembers.Faced with political backlash,the countries stop short of allowing mobility of factors of production such as labor and capital.Which of the following best describes this arrangement?

A)Political union
B)Customs union
C)Common market
D)Economic union

Question 47

Which of the following regional arrangements requires a common currency,harmonization of members' tax rates,and a common monetary and fiscal policy?

A)Free trade area
B)Customs union
C)Common market
D)Economic union

Question 48

The move toward economic union raises the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations.Which of the following provides a solution to this issue?

A)Political union
B)Customs union
C)Exclusive zones
D)Common currency

Question 49

Which of the following makes a political case in favor of regional economic integration?

A)Foreign direct investment can transfer technological,marketing,and managerial know-how to host nations.
B)Free trade stimulates economic growth,which creates dynamic gains from trade.
C)Concerns over national sovereignty often prevent countries from entering into regional trade agreements.
D)Regional arrangements create incentives for cooperation between the neighboring states and reduce the potential for violent conflicts.

Question 50

Which of the following is the most popular form of regional economic integration,accounting for almost 90 percent of regional agreements?

A)Customs union
B)Economic union
C)Common market
D)Free trade agreement

Question 51

Which of the following provides the closest example to a political union?

A)The European Union
B)The United States
C)NAFTA
D)MERCUSOR

Question 52

Which of the following accurately depicts the levels of economic integration,from least integrated to most integrated?

A)Free trade area,customs union,common market,economic union,and political union
B)Economic union,common market,free trade area,political union,and customs union
C)Common market,economic union,political union,free trade area,and customs union
D)Political union,free trade area,common market,customs union,and economic union

Question 53

Which of the following is a major consideration that led to the establishment of the European Community?

A)The pressing need to have a common currency that would make trade between European and non-European countries easier.
B)The need for a united Europe to deal with the United States and the politically alien Soviet Union.
C)The economic lessons from the Great Depression that hit the United States in the 1920s.
D)The spectacular success of the European Free Trade Association (EFTA)formed by Western European countries in 1960.

Question 54

Which of the following is a key feature of a common market which is absent in a customs union?

A)Common external trade policy with regard to nonmembers
B)Movement of factors of production between member nations
C)Removal of barriers to the free flow of goods between member nations
D)Removal of barriers to the free flow of services between member nations

Question 55

Which of the following has been the emphasis of the European Free Trade Association (EFTA)?

A)Industrial goods
B)Fisheries
C)Agricultural goods
D)Services

Question 56

NAFTA stands for:

A)North Asian Free Trade Agreement.
B)North African Free Trade Association.
C)North Atlantic Free Trade Agreement.
D)North American Free Trade Agreement.

Question 57

Which of the following illustrates the costs associated with regional economic integration?

A)Americans suffer job losses when technology support work is outsourced to cheaper locations in countries such as IndiA.
B)Due to the establishment of NAFTA,Canadian workers in the textile industry lost their jobs as Canadian firms moved production to Mexico.
C)The euro is now used by 16 of the 27 member states of the European Union,with some countries opting to retain their national currencies.
D)The Andean Pact was largely based on the EU model,but was far less successful at achieving its stated goals.

Question 58

Which of the following observations makes the case for regional economic integration?

A)International institutions such as the World Trade Organization have been moving the world toward a free trade regime.
B)While a nation as a whole may benefit significantly from a regional free trade agreement,certain groups may lose.
C)It is easier to establish a free trade regime among a limited number of adjacent countries than among the world community.
D)Regional economic integration results in trade diversion whereas global integration results in trade creation.

Question 59

Which of the following countries are currently members of the European Free Trade Association (EFTA)?

A)Portugal,Ireland,Greece,and Spain
B)Denmark,Norway,Finland,and Sweden
C)Austria,Hungary,Finland,and Sweden
D)Norway,Iceland,Liechtenstein,and Switzerland

Question 60

Which of the following is a major reason why regional integration has never been easy to achieve or sustain?

A)Although economic integration aids the majority,it has its costs.
B)Economic integration results in all groups gaining from regional free trade.
C)Free trade between countries is only possible in theory.
D)Government intervention has historically scuttled all integration initiatives.

Question 61

Concerns about _____ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy,fiscal policy,and trade policy.

A)job losses
B)national sovereignty
C)trade unionism
D)cultural uniformity

Question 62

Which of the following is considered the ultimate controlling authority within the EU?

A)Court of Justice
B)European Commission
C)European Council
D)European Parliament

Question 63

Which of the following institutions has a monopoly in proposing European Union legislation?

A)Council of the European Union
B)Court of Justice
C)European Commission
D)European Parliament

Question 64

The European Community became the European Union following the ratification of the:

A)Maastricht Treaty.
B)Warsaw Pact.
C)Treaty of Rome.
D)Single European Act.

Question 65

The two main reasons that have made regional economic integration difficult to achieve are:

A)concerns about labor activism and political ideologies.
B)concerns about immigration and political ideologies.
C)concerns about costs and national sovereignty.
D)concerns about political will and popular support.

Question 66

Which EU institution is composed of one representative from the government of each member state,and whose membership depends on the topic being discussed?

A)Court of Justice
B)European Council
C)European Commission
D)European Parliament

Question 67

Which of the following occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area?

A)Trade correction
B)Trade balancing
C)Trade creation
D)Trade diversion

Question 68

Which of the following is true of the European Commission?

A)The commission's role in competition policy has become increasingly important.
B)The commission has to be approved by the Council of the European Union before it can begin work.
C)The commission does not have a policing role with respect to EU laws.
D)The legislation proposed by the commission goes directly to the European Parliament.

Question 69

_____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

A)Trade creation
B)Trade balancing
C)Trade synergy
D)Trade diversion

Question 70

Which of the following occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area?

A)Trade creation
B)Trade correction
C)Trade balancing
D)Trade diversion

Question 71

Why is the European Council considered to be the ultimate controlling authority within the EU?

A)Because it monitors member states to make sure they are complying with EU laws
B)Because it has a monopoly in proposing European Union legislation
C)Because it is directly elected by the populations of the member states
D)Because draft legislation can become EU law only if the council agrees

Question 72

With the signing of the _____ in 1957,the European Community was established.

A)Treaty of Paris
B)Treaty of Brussels
C)Treaty of Switzerland
D)Treaty of Rome

Question 73

Which of the following factors resulted in the establishment of the European Union (EU)?

A)The spectacular success of the North American Free Trade Agreement (NAFTA).
B)The trade impasse following the oil crisis in the 1970s that occurred due to collusion among oil producing nations.
C)The devastation of Western Europe during two world wars and the desire for a lasting peace.
D)The emergence of Japan as an economic and industrial superpower despite the nuclear holocaust.

Question 74

Suppose Country A and Country B imposed tariffs on imports from all countries,and then they set up a free trade area,scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world.Country A began to import sugar from Country B.Country A had previously been producing sugar at a higher cost.Which of the following has occurred?

A)Trade creation
B)Trade balancing
C)Trade synergy
D)Trade diversion

Question 75

Which of the following illustrates concerns about national sovereignty overriding the objective of regional economic integration?

A)OPEC nations regulating the supply of petroleum as a cartel
B)APEC failing to establish itself as a regional arrangement
C)Admission of Eastern European nations into the EU
D)Great Britain choosing not to opt for the euro

Question 76

Which of the following is NOT one of the four main institutions in the political structure of the European Union?

A)Council of the European Union
B)The European Standards Board
C)The European Commission
D)The European Parliament

Question 77

Which of the following bodies,established in 1951 was the forerunner of the EU?

A)European Economic Community
B)European Coal and Steel Community
C)European Agricultural and Energy Union
D)European Textiles and Agricultural Community

Question 78

The two trade blocs in Europe are:

A)The European Union and the European Free Trade Association.
B)The European Federation and the European Trade Block.
C)The European Commission and the COMINTERN.
D)The European Federation and the European Trade Association.

Question 79

A regional free trade agreement will benefit the world only if:

A)it raises the standard of living in one of the countries involved.
B)the amount of trade it creates exceeds the amount it diverts.
C)the currencies of nations involved in the agreement appreciates.
D)the balance of trade situation remains stable in the region.

Question 80

Identify the EU institution responsible for proposing EU legislation,implementing it,and monitoring compliance with EU laws by member states.

A)Council of the European Union
B)European Commission
C)European Parliament
D)Court of Justice