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Washburn University BU 355 TRUE/FALSE QUESTIONS Chapter 9: Test 1)As with free trade in general, regional economic integration creates gain for consumers, but it can be challenging for some producers

Economics

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Washburn University

BU 355

TRUE/FALSE QUESTIONS

Chapter 9: Test

1)As with free trade in general, regional economic integration creates gain for consumers, but it can be challenging for some producers.

 

2.            In a free trade area, all barriers to the trade of goods and services among member countries are removed and a common external trade policy is adopted.

 

3.            The emphasis of the European Free Trade Association has been on free trade in consumer goods.

 

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

 

5.            In a customs union, a common currency is adopted.

 

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

 

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

 

8.            In terms of regional economic integration, linking neighboring economies and making them increasingly dependent on each other create incentives for political cooperation between the neighboring states.

 

9.            Some economists have pointed out that the benefits of regional integration are determined by the extent of trade diversion, as opposed to trade creation.

 

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

 

11.          In theory, the World Trade Organization rules should ensure that a free trade agreement results in trade diversion.

 

12.          The European Union is by far more significant than the European Free Trade Association (EFTA), in terms of membership as well as economic and political influence in the world economy.

 

13.          With the signing of the Treaty of Rome in 1957, the European Free Trade Association was established.

 

14.          The European Commission is the ultimate controlling authority within the European Union because draft legislation from the commission can become EU law only if the council agrees.

 

15.          The European Council is composed of one representative from the government of each member-state but the membership varies depending on the topic being discussed.

 

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

 

17.          The European Parliament, which meets in Strasbourg, France, is primarily a legislative rather than consultative body.

 

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

 

19.          A disadvantage of the euro is that the development of a pan-European, euro-denominated capital market will decrease the range of investment options open to both individuals and institutions.

 

20.          In an optimal currency area, 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.

 

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

 

22.          The Andean Pact was largely based on the European Union model and was highly successful at achieving its stated goals.

 

23.          The Andean Community now operates as a customs union.

 

24.          A major stumbling block in the creation of the Free Trade Area of the Americas is that the United States wants its southern neighbors to agree to higher manufacturing tariffs, which they are not eager to embrace.

 

25.          The basic objective of the Association of Southeast Asian Nations is to foster freer trade among member countries and to achieve cooperation in their industrial policies.

 

26.          The stated aim of the Asia-Pacific Economic Cooperation is to increase multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.

 

27.          Since the number of trade groups in the African continent is impressive, progress toward the establishment of meaningful trade blocs has been fast.

 

28.          The creation of a single market through regional economic integration offers significant opportunities because markets that were formerly protected from foreign competition are increasingly open.

 

29.          An advantage of the emergence of single markets is that the lowering of barriers to trade and investment among countries has led to decreased price competition throughout the European Union.

 

 

30.          Which of the following refers to 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?

Regional economic integration

Cross-cultural integration

Zoning agreement Administrative trade policies

Balance-of-trade equilibrium

 

 

 

 

 

 

 

 

31.          Which of the following is  with regard to regional economic integration?

Agreements designed to promote freer trade within regions have failed to produce gains from trade for all member countries.

World Trade Organization members are not required to notify the organization of any regional trade agreements in which they participate.

Regional economic integration is good for consumers because it lowers prices.

Regional economic integration benefits producers because they do not have to adapt to a more competitive environment.

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

 

32.          Where has the movement toward regional economic integration been most successful?

Africa

 

South America North America

Europe

Asia

 

33.          Which of the following is the economic level corresponding to the least integration?

A free trade area

 A customs union

A common market

An economic union

 A political union

 

34.          Which of the following is defined as 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?

Free trade area

Command economy

Efficient market

Foreign exchange market

 Location economy

 

35.          Which of the following is  with regard to a free trade area?

Factors of production are allowed to move freely between member nations.

Each member country is allowed to determine its own trade policies with regard to nonmembers.

 Member nations are required to have a common currency.

Member nations are required to have a common monetary and fiscal policy.

Member nations are required to have a central political apparatus that coordinates economic, social, and foreign policy.

 

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

Licensing agreements

 Economic unions

Common markets

Free trade agreements

 Political unions

 

 

37.          Which of the following is  of the European Free Trade Association (EFTA)?

The emphasis of EFTA has been on free trade in agricultural goods.

Industrial goods were left out of the trade arrangement, each member being allowed to determine its own level of support.

Members cannot determine the level of protection applied to goods coming from outside EFTA.

It was founded by those western European countries that initially decided not to be part of the European Community.

It imposes a common tariff, of 5 to 20 percent, on products imported from outside.

 

38.          Three countries enter into an agreement to remove all tariffs and trade barriers 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 levels of economic integration best describes this arrangement?

Political union

Customs union

Common market

Economic union

Monetary union