Question 1

The formation of a free trade area among the countries of Eastern Europe is advocated in order to:

Accepted Answer

A) restore trade trading 
B) retain the traditional trade links that can be justified on market principles 
C) reduce the need for structural change 
D) none of the above 
A) restore trade trading 
B) retain the traditional trade links that can be justified on market principles 
C) reduce the need for structural change 
D) none of the above B

Question 2

Which of the following statements is correct?

Accepted Answer

A) In a customs union,member nations apply a uniform external tariff 
B) in a free-trade area,member nations harmonize their monetary and fiscal policies 
C) within a customs union there is unrestricted factor movement 
D) a customs union is a higher form of economic integration than a common market 
A) In a customs union,member nations apply a uniform external tariff 
B) in a free-trade area,member nations harmonize their monetary and fiscal policies 
C) within a customs union there is unrestricted factor movement 
D) a customs union is a higher form of economic integration than a common market A

Question 3

The benefit that Mexico is likely to receive from NAFTA:

Accepted Answer

A) greater export-led growth 
B) encouraging the return of flight capital 
C) more rapid structural change 
D) all of the above 
A) greater export-led growth 
B) encouraging the return of flight capital 
C) more rapid structural change 
D) all of the above D

Question 4

The formation of the EU resulted in:

Accepted Answer

A) trade creation in industrial and agricultural products 
B) trade diversion in industrial and agricultural products 
C) trade creation in industrial products and trade diversion in agricultural products 
D) trade diversion in industrial products and trade creation in agricultural products 
A) trade creation in industrial and agricultural products 
B) trade diversion in industrial and agricultural products 
C) trade creation in industrial products and trade diversion in agricultural products 
D) trade diversion in industrial products and trade creation in agricultural products

Question 5

The theory of customs union is a special case of the theory of:

Accepted Answer

A) effective protection 
B) the second best 
C) the product cycle 
D) comparative advantage 
A) effective protection 
B) the second best 
C) the product cycle 
D) comparative advantage

Question 6

A trade-diverting customs union:

Accepted Answer

A) increases trade among union members and with nonmember nations 
B) reduces trade among union members and with nonmember nations 
C) increases trade among members but reduces trade with non-members 
D) reduces trade among union members but increases it with nonmembers 
A) increases trade among union members and with nonmember nations 
B) reduces trade among union members and with nonmember nations 
C) increases trade among members but reduces trade with non-members 
D) reduces trade among union members but increases it with nonmembers

Question 7

A customs union that allows for the free movement of labor and capital among its member nations is called a:

Accepted Answer

A) preferential trade arrangement 
B) free-trade area 
C) common market 
D) all of the above 
A) preferential trade arrangement 
B) free-trade area 
C) common market 
D) all of the above

Question 8

A trade-diverting customs union results in:

Accepted Answer

A) trade diversion only 
B) trade creation only 
C) both trade creation and trade diversion 
D) we cannot say 
A) trade diversion only 
B) trade creation only 
C) both trade creation and trade diversion 
D) we cannot say

Question 9

The benefit that the United States is likely to receive from NAFTA:

Accepted Answer

A) increasing competition in product and resource markets 
B) greater technical innovation 
C) improvements in its terms of trade 
D) all of the above 
A) increasing competition in product and resource markets 
B) greater technical innovation 
C) improvements in its terms of trade 
D) all of the above

Question 10

Which is a stumbling block to successful economic integration among groups of developing nations?

Accepted Answer

A) benefits are not evenly distributed among nations 
B) many developing nations are not willing to relinquish part of their newly-acquired sovereignty to a supranational community body,as required for successful economic integration 
C) the complementary nature of their economies and competition for the same world markets for their agricultural exports 
D) all of the above 
A) benefits are not evenly distributed among nations 
B) many developing nations are not willing to relinquish part of their newly-acquired sovereignty to a supranational community body,as required for successful economic integration 
C) the complementary nature of their economies and competition for the same world markets for their agricultural exports 
D) all of the above

Question 11

A trade-diverting customs union:

Accepted Answer

A) increases the welfare of member and nonmember nations 
B) reduces the welfare of member and nonmember nations 
C) increases the welfare of member nations but reduces that of nonmembers 
D) reduces the welfare of nonmembers and may increase or reduce that of members 
A) increases the welfare of member and nonmember nations 
B) reduces the welfare of member and nonmember nations 
C) increases the welfare of member nations but reduces that of nonmembers 
D) reduces the welfare of nonmembers and may increase or reduce that of members

Question 12

A trade-creating customs union is one where:

Accepted Answer

A) lower-cost imports from outside the customs union are replaced by higher-cost imports from a union member 
B) some domestic production in a member nation is replaced by lower-cost imports from another member nation 
C) trade among members increases but trade with nonmembers decreases 
D) trade among members decreases while trade with nonmembers increases 
A) lower-cost imports from outside the customs union are replaced by higher-cost imports from a union member 
B) some domestic production in a member nation is replaced by lower-cost imports from another member nation 
C) trade among members increases but trade with nonmembers decreases 
D) trade among members decreases while trade with nonmembers increases

Question 13

The formation of a trade-creating customs union where all economic resources of member nations are fully employed before and after the formation of the customs union leads to an:

Accepted Answer

A) increase in the welfare of member and nonmember nations 
B) increase in the welfare of member nations only 
C) increase in the welfare of nonmember nations only 
D) increase or decrease in the welfare of member and nonmember nations 
A) increase in the welfare of member and nonmember nations 
B) increase in the welfare of member nations only 
C) increase in the welfare of nonmember nations only 
D) increase or decrease in the welfare of member and nonmember nations

Question 14

A trade-diverting customs union is more likely to lead to trade creation:

Accepted Answer

A) the lower are the pre-union trade barriers of the member countries 
B) the lower are the customs union's barriers on trade with the rest of the world 
C) the smaller is the number of countries forming the customs union and the smaller their size 
D) the more complementary rather than competitive are the economies of the nations forming the customs union 
A) the lower are the pre-union trade barriers of the member countries 
B) the lower are the customs union's barriers on trade with the rest of the world 
C) the smaller is the number of countries forming the customs union and the smaller their size 
D) the more complementary rather than competitive are the economies of the nations forming the customs union

Question 15

Which is not a dynamic benefit from the formation of a customs union?

Accepted Answer

A) increased competition 
B) economies of scale 
C) stimulus to investment 
D) trade creation 
A) increased competition 
B) economies of scale 
C) stimulus to investment 
D) trade creation

The formation of a free trade area among the countries of Eastern Europe is advocated in order to:

Which of the following statements is correct?

The benefit that Mexico is likely to receive from NAFTA:

The formation of the EU resulted in:

The theory of customs union is a special case of the theory of:

A trade-diverting customs union:

A customs union that allows for the free movement of labor and capital among its member nations is called a:

A trade-diverting customs union results in:

The benefit that the United States is likely to receive from NAFTA:

Which is a stumbling block to successful economic integration among groups of developing nations?

A trade-diverting customs union:

A trade-creating customs union is one where:

The formation of a trade-creating customs union where all economic resources of member nations are fully employed before and after the formation of the customs union leads to an:

A trade-diverting customs union is more likely to lead to trade creation:

Which is not a dynamic benefit from the formation of a customs union?

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, Offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, Imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, Present, and Future

Filters

Exam 10: Economic Integration: Customs Unions and Free Trade Areas

The formation of a free trade area among the countries of Eastern Europe is advocated in order to:

Which of the following statements is correct?

The benefit that Mexico is likely to receive from NAFTA:

The formation of the EU resulted in:

The theory of customs union is a special case of the theory of:

A trade-diverting customs union:

A customs union that allows for the free movement of labor and capital among its member nations is called a:

A trade-diverting customs union results in:

The benefit that the United States is likely to receive from NAFTA:

Which is a stumbling block to successful economic integration among groups of developing nations?

A trade-diverting customs union:

A trade-creating customs union is one where:

The formation of a trade-creating customs union where all economic resources of member nations are fully employed before and after the formation of the customs union leads to an:

A trade-diverting customs union is more likely to lead to trade creation:

Which is not a dynamic benefit from the formation of a customs union?

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, Offer Curves, and the Terms of Trade

Factor Endowments and the Heckscherohlin Theory

Economies of Scale, Imperfect Competition, and International Trade

Economic Growth and International Trade

Trade Restrictions: Tariffs

Nontariff Trade Barriers and the New Protectionism

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange Rates

The Income Adjustment Mechanism and Synthesis of Automatic Adjustments

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past, Present, and Future

Filters