Question 1

NAFTA is a:

Accepted Answer

A)  Monetary union 
B)  Free trade area 
C)  Common market 
D)  Customs union 
A)  Monetary union 
B)  Free trade area 
C)  Common market 
D)  Customs union

Question 2

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.
Figure 8.1. Effects of a Customs Union
  
-Consider Figure 8.1.Suppose Greece had formed a customs union with Germany,rather than France.The value of the trade diversion effect would be:

Accepted Answer

A)  Zero 
B)  $5 
C)  $10 
D)  $15 
A)  Zero 
B)  $5 
C)  $10 
D)  $15

Question 4

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

Accepted Answer

A)  Trade diversion 
B)  Trade creation 
C)  Trade destruction 
D)  Trade exhaustion 
A)  Trade diversion 
B)  Trade creation 
C)  Trade destruction 
D)  Trade exhaustion

Question 5

The transition of the former communist countries to market economies requires all of the following except:

Accepted Answer

A)  Removing domestic price controls 
B)  Opening economies to international competition 
C)  Establishing private property rights 
D)  Terminating the convertibility of their currencies 
A)  Removing domestic price controls 
B)  Opening economies to international competition 
C)  Establishing private property rights 
D)  Terminating the convertibility of their currencies

Question 6

For countries forming a customs union,the trade-creation effect represents a welfare loss and the trade-diversion effect represents a welfare gain.

Accepted Answer

A) True 
 B)False

Question 7

By the mid-1990s,the European Union had essentially achieved the common market stage of economic integration.

Accepted Answer

A) True 
 B)False

Question 8

Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.

Accepted Answer

A) True 
 B)False

Question 9

In the United States,which group was most likely to be hurt by the North American Free Trade Agreement?

Accepted Answer

A)  Unskilled labor 
B)  Skilled labor 
C)  Owners of capital equipment 
D)  Owners of financial capital 
A)  Unskilled labor 
B)  Skilled labor 
C)  Owners of capital equipment 
D)  Owners of financial capital

Question 10

The former Soviet Union was characterized by central economic planning and public ownership of manufacturing enterprises.

Accepted Answer

A) True 
 B)False

Question 11

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8.2. Portugal's Steel Market
  
-Consider Figure 8.2.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports,it will purchase 5 tons of steel from France at a price of $500 per ton.

Accepted Answer

A) True 
 B)False

Question 13

As of 1992,the European Union had achieved the monetary union stage of economic integration.

Accepted Answer

A) True 
 B)False

Question 14

If a customs union included all of the countries in the world,there could exist only trade creation,not trade diversion.

Accepted Answer

A) True 
 B)False

Question 15

The implementation of a common market involves all of the following except:

Accepted Answer

A)  Elimination of trade restrictions among member countries 
B)  A common tax system and monetary union 
C)  Prohibition of restrictions on factor movements 
D)  A common tariff levied in imports from nonmembers 
A)  Elimination of trade restrictions among member countries 
B)  A common tax system and monetary union 
C)  Prohibition of restrictions on factor movements 
D)  A common tariff levied in imports from nonmembers

Question 16

Figure 8.2. Portugal's Steel Market
  
-Consider Figure 8.2.As a result of a customs union formed with France,Portugal's overall welfare rises by $900.

Accepted Answer

A) True 
 B)False

Question 17

Figure 8.2. Portugal's Steel Market
  
-Consider Figure 8.2.With free trade,Portugal will import 25 tons of steel from Germany at a price of $200 per ton.

Accepted Answer

A) True 
 B)False

Question 18

A common market

Accepted Answer

A)  Allows the imposition of common external trade barriers against non-members 
B)  Represents less economic integration than a free trade area 
C)  Does not permit free movement of goods among member nations 
D)  Does not allow free movement of factors of production among nations 
A)  Allows the imposition of common external trade barriers against non-members 
B)  Represents less economic integration than a free trade area 
C)  Does not permit free movement of goods among member nations 
D)  Does not allow free movement of factors of production among nations

Question 19

Which organization was founded in 1957 whose objective was to create an economic union among its members?

Accepted Answer

A)  General Agreements on Tariffs and Trade 
B)  Organization of Economic Cooperation and Development 
C)  European Union 
D)  Latin American Free Trade Association 
A)  General Agreements on Tariffs and Trade 
B)  Organization of Economic Cooperation and Development 
C)  European Union 
D)  Latin American Free Trade Association

Question 20

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.
Figure 8.1. Effects of a Customs Union
  
-Consider Figure 8.1.The value of the trade diversion effect,resulting from the Greece/France customs union,equals:

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

NAFTA is a:

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

The transition of the former communist countries to market economies requires all of the following except:

For countries forming a customs union,the trade-creation effect represents a welfare loss and the trade-diversion effect represents a welfare gain.

By the mid-1990s,the European Union had essentially achieved the common market stage of economic integration.

Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.

In the United States,which group was most likely to be hurt by the North American Free Trade Agreement?

The former Soviet Union was characterized by central economic planning and public ownership of manufacturing enterprises.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports,it will purchase 5 tons of steel from France at a price of $500 per ton.

As of 1992,the European Union had achieved the monetary union stage of economic integration.

If a customs union included all of the countries in the world,there could exist only trade creation,not trade diversion.

The implementation of a common market involves all of the following except:

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.As a result of a customs union formed with France,Portugal's overall welfare rises by $900.

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.With free trade,Portugal will import 25 tons of steel from Germany at a price of $200 per ton.

A common market

Which organization was founded in 1957 whose objective was to create an economic union among its members?

the International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

the Balance of Payments

Foreign Exchange

Exchange-rate Determination

Balance-of-payments Adjustments

Exchange-rate Adjustments and the Balance of Payments

Exchange-rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

International Banking: Reserves, debt, and Risk

Filters

Exam 8: Regional Trading Arrangements

NAFTA is a:

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

The transition of the former communist countries to market economies requires all of the following except:

For countries forming a customs union,the trade-creation effect represents a welfare loss and the trade-diversion effect represents a welfare gain.

By the mid-1990s,the European Union had essentially achieved the common market stage of economic integration.

Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.

In the United States,which group was most likely to be hurt by the North American Free Trade Agreement?

The former Soviet Union was characterized by central economic planning and public ownership of manufacturing enterprises.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports,it will purchase 5 tons of steel from France at a price of $500 per ton.

As of 1992,the European Union had achieved the monetary union stage of economic integration.

If a customs union included all of the countries in the world,there could exist only trade creation,not trade diversion.

The implementation of a common market involves all of the following except:

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.As a result of a customs union formed with France,Portugal's overall welfare rises by $900.

Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.With free trade,Portugal will import 25 tons of steel from Germany at a price of $200 per ton.

A common market

Which organization was founded in 1957 whose objective was to create an economic union among its members?

the International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

the Balance of Payments

Foreign Exchange

Exchange-rate Determination

Balance-of-payments Adjustments

Exchange-rate Adjustments and the Balance of Payments

Exchange-rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

International Banking: Reserves, debt, and Risk

Filters