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 creates incentives for political cooperation between
the neighboring states.
9. To achieve full economic union, the European Union (EU) introduced a common currency,
the euro, controlled by a central EU bank.
10. Some economists have pointed out that the benefits of regional integration are
determined by the extent of trade diversion, as opposed to trade creation.
11. Trade creation occurs when lower-cost external suppliers are replaced by higher-cost
suppliers within the free trade area.
12. In theory, the World Trade Organization rules should ensure that a free trade agreement
results in trade diversion.
13. Of the two trade blocs in Europe, the European Union is by far the most significant, in
terms of membership as well as economic and political influence in the world economy.
14. With the signing of the Treaty of Rome in 1957, the European Free Trade Association was
established.
15. 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.
16. 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.
17. The European Parliament is responsible for proposing European Union (EU) legislation,
implementing it, and monitoring compliance with EU laws by member-states.
18. The Court of Justice, which is comprised of one judge from each country, is the supreme
appeals court for European Union law.
19. The European Parliament, which meets in Strasbourg, France, is primarily a legislative
rather than consultative body.
20. The Single European Act proposed to abolish restrictions on cabotage by the end of
1992.
1992.
21. 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.
22. 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.
23. 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.
24. 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.
26. The most significant impact of the North American Free Trade Agreement has not been
to create the background for increased political stability in Mexico.
27. The Andean Pact was largely based on the European Union model and was
highly successful at achieving its stated goals.
28. The Andean Community now operates as a customs union.
29. Mercosur originated in 1988 as a free trade pact between Chile and Argentina.
30. 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.
31. 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.
32. 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.
33. Since the number of trade groups in the African continent is impressive, progress toward
the establishment of meaningful trade blocs has been fast.
34. 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.
35. 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.
36. _____ 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.
37. Which of the following is true with regard to regional economic integration?