Deck 9: Regional Economic Integration

Question 1

Because of the fact that everyone benefits from economic integration,it is easy to achieve and sustain.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

The European Parliament is primarily a consultative rather than legislative body.

Question 5

There are two main trading blocs in Europe,the European Union and the European Free Trade Association.

Question 6

The judges of the European Court of Justice are required to act as representatives of national interests,rather than as independent officials.

Question 7

The European Union is an example of a perfect economic union.

Question 8

A major impediment to economic integration is the loss of sovereignty it entails.

Question 9

A common market entails even closer economic integration and cooperation than an economic union.

Question 10

In theory,WTO rules should ensure that a free trade agreement results in trade diversion.

Question 11

Linking neighboring countries economically and making them interdependent creates incentives to increase political cooperation as well.

Question 12

Trade diversion occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area.

Question 13

The Treaty of Rome,signed in 1957,established the European Free Trade Association.

Question 14

A central reason for the establishment of the EU was the devastation of Western Europe during two world wars and the desire for a lasting peace.

Question 15

The movement toward regional economic integration been most successful in Asia.

Question 16

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

Question 17

Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

Question 18

The ultimate controlling unit within the EU is the European Council.

Question 19

In a customs union,trade barriers are eliminated among member countries,and each country maintains its own external trade polices with nonmember countries.

Question 20

Regional economic integration involves agreements among countries in a geographic region to reduce,and ultimately remove,tariff and nontariff barriers to the free flow of goods,services,and factors of production between each other.

Question 21

The Asia-Pacific Economic Cooperation was established to increase multinational cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.

Question 22

The Single European Act committed EU countries to adopting a common currency by January 1,1999.

Question 23

The establishment of the euro required participating countries to give up their monetary policy.

Question 24

To exploit the opportunities presented by the EU,non-EU firms must establish EU subsidiaries.

Question 25

On average,studies indicate that NAFTA's overall impact has been small but positive.

Question 26

The governments of both Canada and the United States are keen on adding other Latin American countries to NAFTA.

Question 27

According to Alexander Yeats,the trade diversion effects of Mercosur outweigh its trade creation effects.

Question 28

Establishment of the euro created the largest currency zone in the world,replacing the position the U.S.dollar had held for decades.

Question 29

Once barriers to trade and investment are removed,companies can treat a group of integrated countries like the EU as a single market and produce standardized products for it.

Question 30

The East African Community (EAC)has been a successful integration effort in Africa during the last three decades.

Question 31

The Andean Pact is a highly successful common market modeled after the EU.

Question 32

The Free Trade Area of the Americas that was established in 2005 has thus far proven to be a success.

Question 33

A benefit to companies of economic integration is the opportunity to centralize their production and reduce costs.

Question 34

The implied loss of national sovereignty to the ECB underlies the decision by Great Britain,Denmark,and Sweden to stay out of the euro zone for now.

Question 35

The bulk of intra-ASEAN trade consisted of goods whose tariffs had been reduced through an ASEAN preferential trade arrangement.

Question 36

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

Question 37

A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets.

Question 38

Political turmoil in several African nations has persistently impeded any meaningful progress in economic integration.

Question 39

Great Britain,Sweden,and France have led the push toward adopting the euro.

Question 40

Since its establishment,the euro has had a stable trading history.

Question 41

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

A) Trade deficit
B) Trade diversion
C) Trade creation
D) Trade distortion

Question 42

Which of the following is directly elected by the populations of the member states and is primarily a consultative rather than legislative body?

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

Question 43

Which of the following explains why economic integration has never been easy to achieve or sustain,despite the strong economic and political arguments in support?

A) No country has shown significant improvement because of economic integration.
B) Countries fear a reduction of their political weight in the world because of economic integration.
C) Linking neighboring economies and making them increasingly dependent on each other creates little incentives for political cooperation.
D) While a nation as a whole may benefit significantly,certain groups may lose.

Question 44

Which feature of a common market differentiates it from a customs union?

A) Harmonization of members' tax rates
B) A common currency
C) A common external trade policy toward nonmembers
D) Ability of factors of production to move freely between members

Question 45

Country X and Country Y reach an agreement to boost bilateral trade.They agree to remove all barriers to the trade of goods and services.They,however,are free to determine their own trade policies with regard to nonmembers.Which level of economic integration is this an example of?

A) A customs union
B) An economic union
C) A common market
D) A Free trade area

Question 46

To ensure that a free trade agreement does not result in trade diversion,which of the following has to come within the scope of WTO?

A) Nontariff barriers
B) Services
C) Energy markets
D) Tax rates

Question 47

A _____ 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) common market
B) customs union
C) free trade area
D) bonded market

Question 48

Which of the following is a reason why the European Union is considered an imperfect economic union?

A) Factors of production are not allowed to move freely between member countries.
B) Not all members of the union have adopted the euro.
C) Almost all markets are heavily regulated.
D) Products and services are not allowed to move freely between member countries.

Question 49

From least integrated to most integrated,the levels of economic integration are:

A) a common market,a free trade area,an economic union,a customs union,and a political union.
B) a free trade area,a customs union,a common market,an economic union,and a political union.
C) a customs union,a free trade area,a common market,a political union,and an economic union.
D) a common market,an economic union,a customs union,a free trade area,and a political union.

Question 50

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 offers a solution to this problem?

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

Question 51

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

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

Question 52

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

A) Since it is responsible for implementing EU legislation and monitoring compliance with EU laws by member states
B) Since its role in setting competition policy is becoming increasingly important to business
C) Since it has the right to vote on the appointment of commissioners
D) Since draft legislation from the commission can become EU law only if the council agrees

Question 53

Three countries agree to remove barriers to trade between member countries and adopt a common external trade policy toward nonmembers.They also agree to allow people and other factors of production to move freely across their borders.Which level of economic integration is this an example of?

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

Question 54

Country A and Country B entered into a free trade agreement recently.After this,Country A starts importing heavy machinery from Country

A) Trade creation
B) Efficiency gain
B)Country A used to previously import such machinery at lower rates from another country.Which of the following has occurred in this scenario?
C) Trade deficit
D) Trade diversion

Question 55

Which feature of a customs union differentiates it from a free trade area?

A) Harmonization of members' tax rates
B) A common currency
C) A common external trade policy toward nonmembers
D) Ability of factors of production to move freely between members

Question 56

A(n)_____ involves the free flow of products and factors of production between member countries,the adoption of a common external trade policy,a common currency,harmonization of members' tax rates,and a common monetary and fiscal policy.

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

Question 57

Which feature of an economic union differentiates it from a common market?

A) Free flow of products and factors of production between member countries
B) A common monetary and fiscal policy
C) A common external trade policy toward nonmembers
D) Ability of factors of production to move freely between members

Question 58

The European Community was established by:

A) the Treaty of Rome signed in 1957.
B) the Maastricht Treaty signed in 1991.
C) the Maastricht Treaty of 1994.
D) the Single European Act of 1987.

Question 59

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

A) Efficiency gain
B) Trade diversion
C) Trade deficit
D) Trade creation

Question 60

A political benefit of economic integration is that:

A) it enables participants to achieve gains from the free flow of trade.
B) it enables participants to achieve gains from the free flow of investment.
C) it allow countries to specialize in the production of goods and services that they can produce most efficiently.
D) it creates reduces the potential for violent conflict.

Question 61

Which of the following observations is not true of the euro?

A) It is used by all member states of the European Union.
B) It required participating countries to give up their own currencies.
C) It required participating countries to give up control over monetary policy.
D) By adopting it,the EU created the second most widely traded currency in the world.

Question 62

Which of the following is a reason why Turkey is not yet a member of the EU?

A) Because only about 10 percent of Turkey's international trade is with the EU.
B) Because of concerns over human rights issues in the country.
C) Because the country has yet to form a customs union with the EU.
D) Because of Turkey's weak economy.

Question 63

What was the main objection raised by those in the United States and Canada who opposed the ratification of the NAFTA?

A) Job losses
B) Balance of payment problems
C) Threat of competition from Asian companies
D) Threat of a loss of national sovereignty

Question 64

Which of the following observations pertaining to the EU's Court of Justice is incorrect?

A) It is comprised of one judge from each country.
B) It is the supreme appeals court for EU law.
C) Its judges are required to act as representatives of national interests.
D) A member country can bring other members to the court for failing to meet EU treaty obligations.

Question 65

How does the NAFTA seem to increase the international competitiveness of U.S.and Canadian firms?

A) It gives them access to scarce natural resource hitherto unavailable.
B) It increases tariff barriers making the North American market less attractive to Asian companies.
C) It allows them to take advantage of lower labor costs in Mexico.
D) It gives them production bases in South American markets like Brazil and Argentina.

Question 66

In a(n)_____,similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy.

A) optimal currency area
B) unified economic area
C) uniform currency zone
D) monetary zone

Question 67

In early 2006,six CARICOM members and the United States established the _____,which was modeled on the EU's single market.

A) Central American Common Market
B) Central America Free Trade Agreement
C) Caribbean Single Market and Economy
D) North American Free Trade Area

Question 68

Which of the following was the outcome of the Treaty of Lisbon signed in 2007?

A) It established the European Community.
B) It resulted in the adoption of the Euro.
C) It changed the name of the European Community to the European Union.
D) It increased the power of the European Parliament.

Question 69

Which of the following is seen to be a consequence of the size of the EU from 15 nations to 27 nations?

A) Delays in the decision-making processes
B) Elimination of the sovereign debt crisis
C) Euro becoming the most traded currency in the world
D) Huge initial impact on the overall economic welfare

Question 70

Which of the following accounts for about 55 percent of the world's GNP and 49 percent of world trade?

A) NAFTA
B) APEC
C) ASEAN
D) EFTA

Question 71

Which of the following is seen as a benefit of the euro?

A) Governments gaining greater control over their monetary policies
B) Reduced competition in most industries
C) Zero interest expense for businesses
D) Lower foreign exchange and hedging costs

Question 72

According to Alexander Yeats:

A) the trade diversion effects of Mercosur outweigh its trade creation effects.
B) the fastest growing items in intra-Mercosur trade were capital-intensive goods produced efficiently in the member countries.
C) Mercosur countries will be able to compete globally once the group's external trade barriers come down.
D) the customs union is becoming more perfect over time.

Question 73

Mercosur originated as a(n)_____ between Brazil and Argentina in 1988.

A) common market
B) free trade pact
C) customs union
D) economic union

Question 74

Which of the following is the most frequently aired objection to free trade in Africa?

A) These economies are too small for free trade to exist.
B) These countries are not ready for a full-fledged political union with a common currency.
C) They need to be "protected" by tariff barriers from unfair foreign competition.
D) The larger nations like South Africa and Kenya stand much to lose from free trade and competition.

Question 75

Bolivia,Peru,Ecuador,Columbia,and Venezuela are all members of:

A) Mercosur.
B) NAFTA.
C) APEC.
D) the Andean Pact.

Question 76

Which of the following is seen as a disadvantage of the euro?

A) Higher foreign exchange and hedging costs
B) National authorities losing control over monetary policy
C) It becomes difficult to compare prices across Europe
D) It undermines the development of a pan-European capital market

Question 77

The lowering of barriers to trade and investment between countries is likely to lead to _____ throughout the EU.

A) higher costs of borrowing
B) increase prices
C) increase in hedging costs
D) increased price competition

Question 78

Which of the following was required for new applicants to qualify for EU membership?

A) Minimum economy size of €1 trillion
B) Nationalization of private assets
C) Deregulation of markets
D) Sustained GDP growth of 10 percent for five years

Question 79

Which treaty,signed in December 1991,committed EC members to adopting a common currency by January 1,1999?

A) The Maastricht Treaty
B) The Treaty of Rome
C) The Single European Act
D) The Treaty of Lisbon

Question 80

Which of the following is true of ASEAN?

A) China,India,South Korea,and Singapore are among its members.
B) Collectively,the member states account for about 55 percent of world trade.
C) It is slowly progressing toward establishing a free trade zone.
D) It has been successful in fulfilling its basic objective of fostering freer trade between member countries.