Question 1

All of the following are potential drawbacks of regional integration EXCEPT ________.

Accepted Answer

Greater consensus is not a potential drawback of regional integration. In fact, it is often one of the main goals of regional integration as it facilitates cooperation and collaboration among member countries. The other options have all been cited as potential negative consequences of regional integration. Loss of national sovereignty refers to the idea that member countries may have to give up some control over their own policies and decision-making in order to conform to the rules and regulations of the regional bloc. Shifts in employment can occur if certain industries or regions are disproportionately impacted by changes in trade patterns resulting from integration. Trade diversion can occur if member countries start trading more with each other instead of with non-members, leading to inefficiencies and reduced competitiveness.

Question 2

Higher levels of trade between nations results in all of the following EXCEPT ________.

Accepted Answer

Higher levels of trade between nations generally lead to greater specialization, as nations focus on producing goods and services that they are relatively better at producing. This leads to greater efficiency, consumption, and standards of living, but not less specialization.

Question 3

Which of the following is best classified as an economic union?

Accepted Answer

The European Union is considered the best example of an economic union as it involves a high level of economic cooperation and integration, including a single market and common policies on issues such as trade, agriculture, and competition. MERCOSUR, NAFTA, and the Andean Community are all examples of regional trade agreements but do not have the same level of economic integration as the EU.

Question 4

A(n) ________ requires member nations to harmonize their tax, monetary, and fiscal policies and create a common currency.

Accepted Answer

An economic union is a type of trade agreement that requires member nations to harmonize their tax, monetary and fiscal policies, and establish a common currency. This leads to a higher degree of economic integration than a customs union, a free-trade area, or a common market.

Question 5

In 1951, Belgium, France, West Germany, ________, Luxembourg, and the Netherlands created what was called the European Coal and Steel Community.

Accepted Answer

Italy was not one of the founding members of the European Coal and Steel Community, which was created in 1951 by Belgium, France, West Germany, Luxembourg, and the Netherlands.

Question 6

A group of nations currently taking steps toward political union is ________.

Accepted Answer

The European Union (EU) is a group of 27 member countries in Europe that have agreed to work together on a number of issues, including economic policy, foreign relations, and security. The EU is taking steps toward political union through initiatives such as the Eurozone and the Common Security and Defense Policy. The other options listed are regional trade agreements, but do not involve the same level of political integration as the EU.

Question 7

Which of the following is NOT a result of trade creation?

Accepted Answer

Trade creation typically results in lower costs for consumers and industrial buyers, as well as a wider selection of goods and services. Imported goods may still be more expensive due to shipping and other costs, but overall, trade creation should not result in imported goods being available at higher prices.

Question 8

Which of the following requires nations to give up the least amount of sovereignty?

Accepted Answer

A free-trade area is an agreement between two or more countries to eliminate tariffs and trade barriers on goods and services. It requires nations to give up the least amount of sovereignty because they only have to agree to eliminate trade barriers, and they can still set their own policies on other matters such as immigration, taxation, and regulation. In contrast, an economic union, common market, or political union would require countries to give up more sovereignty in areas such as fiscal and monetary policy, trade regulations, and political integration.

Question 9

The increase in the level of trade among nations that results from regional economic integration is called ________.

Accepted Answer

Trade creation refers to the increase in trade resulting from regional economic integration, as member countries reduce trade barriers and increase economic cooperation.

Question 10

Economic integration whereby countries remove barriers to trade and the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies is called a(n) ________.

Accepted Answer

An economic union involves the integration of economic policies, removal of barriers to trade and movement of labor and capital, and coordination of a common trade policy against nonmembers. This is the highest level of economic integration and involves not only free trade but also shared fiscal, monetary, and social policies. The other options, customs union, common market, and free-trade area, involve varying degrees of trade liberalization and cooperation but do not necessarily involve coordination of economic policies.

Question 11

The most sophisticated and advanced example of regional integration today is occurring in ________.

Accepted Answer

The European Union (EU) is currently the most advanced and sophisticated example of regional integration. It has established a common market, a common currency, and a complex system of political and economic governance among its member states. The EU also has a high level of institutionalization, including a parliament, a court system, and a bureaucracy tasked with implementing policies across the region.

Question 12

Economic integration whereby countries remove all barriers to trade and the movement of labor and capital between themselves but erect a common trade policy against nonmembers is called a(n) ________.

Accepted Answer

Common market is the economic integration whereby countries remove all barriers to trade and the movement of labor and capital between themselves but erect a common trade policy against nonmembers. Economic union involves harmonization of economic policies as well. Customs union only involves removing barriers to trade but not the movement of labor and capital. Political union involves a common government and foreign policy.

Question 13

Canada and the United States are early examples of ________.

Accepted Answer

The answer of Canada and the United States are early...

Question 14

A key objective of early integration efforts in Europe in the 1950s was ________.

Accepted Answer

The key objective of early integration efforts in Europe in the 1950s was peace. The formation of the European Coal and Steel Community and the European Economic Community were aimed at promoting closer economic and political ties between European nations with the goal of preventing future conflicts and promoting peace.

Question 15

Integration whereby countries coordinate aspects of their economic and political systems is called a(n) ________.

Accepted Answer

The answer of Integration whereby countries coordinate aspects of their...

Question 16

The main difference between a free-trade area and a customs union is that the members of a customs union ________.

Accepted Answer

In a free-trade area, members agree to eliminate tariffs and trade barriers on goods traded among themselves, but each member retains its own policies on trade with nonmember countries. In a customs union, members agree not only to eliminate tariffs and trade barriers among themselves but also to adopt a common trade policy with nonmember countries. This means that the members of a customs union agree to treat trade with all nonmember nations in a similar manner.

Question 17

A(n) ________ is the greatest extent of national integration.

Accepted Answer

A political union is the greatest extent of national integration as it involves the merging of governance structures and decision-making processes among member states. Economic unions, common markets, and customs unions involve varying degrees of economic integration, but do not necessarily involve political integration.

Question 18

All of the following are true of trade diversion EXCEPT that it ________.

Accepted Answer

Trade diversion can increase prices of products and unintentionally reward a less-efficient producer within the trading bloc. However, it does not guarantee consumers a wider selection of goods. In fact, it can lead to a reduction in the variety of goods available to consumers if trade shifts away from more efficient non-member producers to less efficient member producers.

Question 19

Economic integration whereby countries remove all barriers to trade among themselves, but erect a common trade policy against nonmembers is called a(n) ________.

Accepted Answer

A customs union removes all barriers to trade among member countries, but members agree to a common trade policy against nonmembers. This differs from a free-trade area, which only removes barriers to trade among members but allows for individual trade policies towards nonmembers. Economic union involves not only trade but also harmonization of economic policies such as fiscal, monetary, and social policies. A common market goes beyond a customs union by allowing for the free movement of factors of production (e.g. labor, capital) among member countries.

Question 20

Studies of the Southern Common Market (MERCOSUR) found that the net effect of the agreement was ________.

Accepted Answer

Studies have shown that MERCOSUR has resulted in trade creation by increasing trade between member countries and reducing trade costs through tariff elimination and other trade facilitation measures.

Quiz 8: Regional Economic Integration