Question 1

Discuss the trend toward increased regional economic integration.

Accepted Answer

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Question 2

Discuss the economic case for economic integration. How does it relate to trade theory?

Accepted Answer

The answer of Discuss the economic case for economic integration....

Question 3

What is the political case for integration? How did political arguments influence the establishment of the European Union?

Accepted Answer

The answer of What is the political case for integration?...

Question 4

A(n) _____ requires a common currency, harmonization of the member countries' tax rates, and a common monetary and fiscal policy.

Accepted Answer

There are five levels of economic integration. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic union, and, finally, a full political union. An economic union eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries. In addition, a full political union requires a common currency, harmonization of the member countries' tax rates, and a common monetary and fiscal policy.

Question 5

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

Accepted Answer

The argument most frequently heard in Africa is that because these countries have less developed and less diversified economies, they need to be "protected" by tariff barriers from unfair foreign competition.

Question 6

How has the euro contributed to increasing competition in the European region?

Accepted Answer

The adoption of a common currency makes it easier to compare prices across Europe. This has been increasing competition because it has become easier for consumers to shop around.

Question 7

What are impediments to countries integrating?

Accepted Answer

The answer of What are impediments to countries integrating?...

Question 8

There are four main institutions that make up the political structure of the EU. Which of them is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws?

Accepted Answer

There are four main institutions that make up the political structure of the EU. The European Commission is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws. The European Council represents the interests of member states. The European Parliament acts a consultative body and debates legislation proposed by the commission and forwarded to it by the council. Finally, the Court of Justice is the supreme appeals court for EU law.

Question 9

Which of the following, adopted by the member nations of the European Community in 1987, committed member countries to work toward the establishment of a single market by December 31, 1992?

Accepted Answer

The Single European Act was independently ratified by the parliaments of each member country and became EC law in 1987.

Question 10

The _____ represents the interests of member states and is clearly the ultimate controlling authority within the EU.

Accepted Answer

The European Council represents the interests of member states. It is clearly the ultimate controlling authority within the EU.

Question 11

United States, Canada, and Mexico are member nations of _____.

Accepted Answer

United States, Canada, and Mexico are member nations of the North American Free Trade Agreement (NAFTA).

Question 12

A(n) _____ eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries.

Accepted Answer

There are five levels of economic integration. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic union, and, finally, a full political union. An economic union eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries.

Question 13

Which of the following established the second largest currency zone in the world?

Accepted Answer

The Maastricht Treaty, signed in 1991 by EC members, committed signatories to adopting a common currency, the euro, by 1999. The establishment of the euro created the second largest currency zone in the world, second only to the U.S. dollar. While the 12 participating countries locked their exchange rates against each other in 1999, euro notes and coins were not actually issued until 2002. By mid-2002, all prices and routine economic transactions within the euro zone were in euros.

Question 14

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

Accepted Answer

The lowering of barriers to trade and investment between countries is likely to lead to increased price competition throughout the EU and NAFTA.

Question 15

Compare and contrast a free trade area and a common market. Provide examples.

Accepted Answer

The answer of Compare and contrast a free trade area...

Question 16

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

Accepted Answer

Collectively, the APEC member states account for about 55 percent of the world's GNP, 49 percent of world trade, and much of the growth in the world economy.

Question 17

Which of the following is a concern of some economist regarding regional integration?

Accepted Answer

While there is a general movement toward the establishment of regional free trade agreements, some economists have suggested that caution be used. According to these economists, the benefits of regional integration may have been oversold, while the costs have been ignored. They point out that the benefits of regional integration are determined by the extent of trade creation as opposed to trade diversion. Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. It may also occur when higher-cost external producers are replaced by lower-cost external producers with the free trade area. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. A regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts.

Question 18

Many observers credit NAFTA with helping create the background for increased political stability in _____.

Accepted Answer

Perhaps the most significant impact of NAFTA has not been economic, but political. Many observers credit NAFTA with helping create the background for increased political stability in Mexico. For most of the post-NAFTA period, Mexico has been viewed as a stable democratic nation with a steadily growing economy, something that is beneficial to the United States, which shares a 2,000-mile border with the country.

Question 19

Which of the following is true of ASEAN?

Accepted Answer

Formed in 1967, the Association of Southeast Asian Nations (ASEAN) includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. ASEAN and AFTA are at least progressing toward establishing a free trade zone.

Question 20

Which is the most enduring free trade area in the world?

Accepted Answer

The most enduring free trade area in the world is the European Free Trade Association (EFTA). Established in January 1960, EFTA currently joins four countries-Norway, Iceland, Liechtenstein, and Switzerland-down from seven in 1995. EFTA was founded by those Western European countries that initially decided not to be part of the European Community. The emphasis of EFTA has been on free trade in industrial goods. Agriculture was left out of the arrangement, each member being allowed to determine its own level of support. Members are also free to determine the level of protection applied to goods coming from outside EFTA.

Quiz 9: Regional Trade Pacts Give the Mexican Auto Industry an Edge