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c9 Key
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?
31. Which of the following is true with regard to regional economic integration?
32. Where has the movement toward regional economic integration been most successful?
33. Which of the following is the economic level corresponding to the least integration?
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?
35. Which of the following is true with regard to a free trade area?
36. Which of the following are the most popular form of regional economic integration, accounting for almost
90 percent of regional agreements?
37. Which of the following is true of the European Free Trade Association (EFTA)?
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?
39. Which of the following has no barriers to trade between member countries, includes a common external
trade policy, and allows factors of production to move freely between members?
40. Which of the following is a feature of a common market?
41. Which of the following entails a closer economic integration and cooperation than a common market?
42. Which of the following levels of economic integration involves the use of a common currency,
harmonization of members' tax rates, and a common monetary and fiscal policy?
43. Which of the following is true with regard to an economic union?
44. Establishment of which of the following would hold a coordinating bureaucracy accountable to the citizens
of member nations?
45. Which of the following is defined as a central political apparatus that coordinates the economic, social, and
foreign policy of the member-states?
46. Which of the following supports the economic case for regional economic integration?
47. Which of the following is true of the political case for regional economic integration?
48. Which of the following is a major consideration that underlay the establishment of the European
Community?
