61.
Which of the following was the outcome of the Treaty of Lisbon signed in
2007?
A.
It established the European Community.
B.
It resulted in the adoption of the Euro.
C.
It changed the name of the European Community to the European Union.
D.
It increased the power of the European Parliament.
After significant debate, in December 2007 the member states signed a new
treaty, the Treaty of Lisbon, under which the power of the European
Parliament is increased.
62.
Which of the following observations pertaining to the EU’s Court of Justice
is incorrect?
A.
It is comprised of one judge from each country.
B.
It is the supreme appeals court for EU law.
C.
Its judges are required to act as representatives of national interests.
D.
A member country can bring other members to the court for failing to
meet EU treaty obligations.
The Court of Justice, which is comprised of one judge from each country, is
the supreme appeals court for EU law. The judges are required to act as
independent officials, rather than as representatives of national interests.
63.
Which of the following observations is not true of the euro?
A.
It is used by all member states of the European Union.
B.
It required participating countries to give up their own currencies.
C.
It required participating countries to give up control over monetary policy.
D.
By adopting it, the EU created the second most widely traded currency in
the world.
The euro is now used by 17 of the 27 member states of the European Union.
64.
Which treaty, signed in December 1991, committed EC members to
adopting a common currency by January 1, 1999?
A.
The Maastricht Treaty
B.
The Treaty of Rome
C.
The Single European Act
D.
The Treaty of Lisbon
In December 1991, EC members signed a treaty (the Maastricht Treaty) that
committed them to adopting a common currency by January 1, 1999.
65.
Which of the following is seen as a benefit of the euro?
A.
Governments gaining greater control over their monetary policies
B.
Reduced competition in most industries
C.
Zero interest expense for businesses
D.
Lower foreign exchange and hedging costs
Because of the euro, businesses and individuals will realize significant
savings from having to handle one currency, rather than many. These
savings come from lower foreign exchange and hedging costs.
66.
Which of the following is seen as a disadvantage of the euro?
A.
Higher foreign exchange and hedging costs
B.
National authorities losing control over monetary policy
C.
It becomes difficult to compare prices across Europe
D.
It undermines the development of a pan-European capital market
The drawback of euro is that national authorities have lost control over
monetary policy.
67.
In a(n) _____, 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.
A.
optimal currency area
B.
unified economic area
C.
uniform currency zone
D.
monetary zone
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.
68.
Which of the following was required for new applicants to qualify for EU
membership?
A.
Minimum economy size of €1 trillion
B.
Nationalization of private assets
C.
Deregulation of markets
D.
Sustained GDP growth of 10 percent for five years
To qualify for EU membership the applicants had to privatize state assets,
deregulate markets, restructure industries, and tame inflation.
69.
Which of the following is seen to be a consequence of the size of the EU
from 15 nations to 27 nations?
A.
Delays in the decision-making processes
B.
Elimination of the sovereign debt crisis
C.
Euro becoming the most traded currency in the world
D.
Huge initial impact on the overall economic welfare
Given the small size of the Eastern European economies, the initial impact
of the EU expansion will probably be small. The biggest notable change
might be in the decision-making processes, where budget negotiations
among 27 nations are bound to prove problematic.
70.
Which of the following is a reason why Turkey is not yet a member of the
EU?
A.
Because only about 10 percent of Turkey’s international trade is with the
EU.
B.
Because of concerns over human rights issues in the country.
C.
Because the country has yet to form a customs union with the EU.
D.
Because of Turkey’s weak economy.
Full membership for Turkey has been denied because of concerns over
human rights issues (particularly Turkish policies toward its Kurdish
minority).
71.
How does the NAFTA seem to increase the international competitiveness of
U.S. and Canadian firms?
A.
It gives them access to scarce natural resource hitherto unavailable.
B.
It increases tariff barriers making the North American market less
attractive to Asian companies.
C.
It allows them to take advantage of lower labor costs in Mexico.
D.
It gives them production bases in South American markets like Brazil and
Argentina.
The international competitiveness of U.S. and Canadian firms that moved
production to Mexico to take advantage of lower labor costs would be
enhanced, enabling them to better compete with Asian and European rivals.
72.
What was the main objection raised by those in the United States and
Canada who opposed the ratification of the NAFTA?
A.
Job losses
B.
Balance of payment problems
C.
Threat of competition from Asian companies
D.
Threat of a loss of national sovereignty
Those who opposed NAFTA claimed that ratification would be followed by a
mass exodus of jobs from the United States and Canada into Mexico as
employers sought to profit from Mexico’s lower wages and less strict
environmental and labor laws.
73.
Bolivia, Peru, Ecuador, Columbia, and Venezuela are all members of:
A.
Mercosur.
B.
NAFTA.
C.
APEC.
D.
the Andean Pact.
Bolivia, Chile, Ecuador, Colombia, and Peru signed an agreement in 1969 to
create the Andean Pact.
74.
Mercosur originated as a(n) _____ between Brazil and Argentina in 1988.
A.
common market
B.
free trade pact
C.
customs union
D.
economic union
Mercosur originated in 1988 as a free trade pact between Brazil and
Argentina.
75.
According to Alexander Yeats:
A.
the trade diversion effects of Mercosur outweigh its trade creation
effects.
B.
the fastest growing items in intra-Mercosur trade were capital-intensive
goods produced efficiently in the member countries.
C.
Mercosur countries will be able to compete globally once the group’s
external trade barriers come down.
D.
the customs union is becoming more perfect over time.
According to Alexander Yeats, the trade diversion effects of Mercosur
outweigh its trade creation effects.
76.
In early 2006, six CARICOM members and the United States established the
_____, which was modeled on the EU’s single market.
A.
Central American Common Market
B.
Central America Free Trade Agreement
C.
Caribbean Single Market and Economy
D.
North American Free Trade Area
Modeled on the EU’s single market, CSME’s goal is to lower trade barriers
and harmonize macroeconomic and monetary policy between member
states.
77.
Which of the following is true of ASEAN?
A.
China, India, South Korea, and Singapore are among its members.
B.
Collectively, the member states account for about 55 percent of world
trade.
C.
It is slowly progressing toward establishing a free trade zone.
D.
It has been successful in fulfilling its basic objective of fostering freer
trade between member countries.
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.
78.
Which of the following accounts for about 55 percent of the world’s GNP
and 49 percent of world trade?
A.
NAFTA
B.
APEC
C.
ASEAN
D.
EFTA
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.
79.
Which of the following is the most frequently aired objection to free trade in
Africa?
A.
These economies are too small for free trade to exist.
B.
These countries are not ready for a full-fledged political union with a
common currency.
C.
They need to be “protected” by tariff barriers from unfair foreign
competition.
D.
The larger nations like South Africa and Kenya stand much to lose from
free trade and competition.
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.
80.
The lowering of barriers to trade and investment between countries is likely
to lead to _____ throughout the EU.
A.
higher costs of borrowing
B.
increase prices
C.
increase in hedging costs
D.
increased price competition
The lowering of barriers to trade and investment between countries is likely
to lead to increased price competition throughout the EU and NAFTA.
Essay Questions
81.
Discuss the trend toward increased regional economic integration.
In recent years, there has been a strong move toward regional economic
integration, or agreements made by groups of countries in geographic
regions to reduce, and ultimately remove, tariff and nontariff barriers to the
free flow of goods, services, and factors of production between each other.
By 2009, nearly all of the WTO’s members had notified the organization of
participation in one or more regional trade agreements. By entering into
regional agreements, groups of countries are hoping to reduce trade
barriers more rapidly than can be achieved under the auspices of the WTO.