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MODULE 5 CHAPTER 9 REVIEW AGB 302 EXAM QUESTIONS AND ANSWER
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MODULE 5 CHAPTER 9 REVIEW AGB 302 EXAM QUESTIONS AND ANSWER
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MODULE 5 CHAPTER 9 REVIEW AGB302 EXAM QUESTIONS AND ANSWER
Regional Economic Integration - Answer -agreements between countries in a
geographic region to reduce tariff and non-tariff barriers to the free flow of goods,
services, and factors of production between each other
Do regional trade agreements promote free trade? - Answer -In theory, yes, but the
world may be moving toward a situation in which a number of regional trade blocks
compete against each other
What Are The Levels Of
Regional Economic Integration? - Answer -1. A free trade area eliminates all barriers to
the trade of goods and services among
member countries
2. A customs union eliminates trade barriers between member countries and adopts a
common external trade policy
3. A common market has no barriers to trade between member countries, a common
external trade policy, and the free movement of the factors of production
4. An economic union has the free flow of
products and factors of production between members, a common external trade policy,
a
common currency, a harmonized tax rate, and a common monetary and fiscal policy
5. A political union involves a central political apparatus that coordinates the economic,
social, and foreign policy of member states
Free Trade Area Examples - Answer -European Free Trade Association (EFTA) -
Norway, Iceland, Liechtenstein, and
Switzerland
North American Free Trade Agreement
(NAFTA) - U.S., Canada, and Mexico
, Customs Union Example - Answer -Andean Community (Bolivia, Colombia, Ecuador,
and Peru)
Common Market Example - Answer -Mercosur (Brazil, Argentina, Paraguay, and
Uruguay)
Economic Union Example - Answer -European Union (EU)
Political Union Example - Answer -the EU is headed toward at least partial political
union, and the U.S. is an example of even closer political union
Why should countries integrate their economies? - Answer -All countries gain from free
trade and investment
- regional economic integration is an attempt to exploit the gains from free trade and
investment
Linking countries together, making them more dependent on each other
- creates incentives for political cooperation and reduces the likelihood of violent conflict
- gives countries greater political clout when dealing with other nations
What limits efforts at integration? - Answer -Economic integration can be difficult
because
while a nation as a whole may benefit from a regional
free trade agreement, certain groups may lose
it implies a loss of national sovereignty
Regional economic integration is only beneficial if the amount of trade it creates
exceeds the
amount it diverts
trade creation occurs when low cost producers within
the free trade area replace high cost domestic
producers
trade diversion occurs when higher cost suppliers within the free trade area replace
lower cost external
suppliers
What Is The Status Of Regional
Economic Integration In Europe? - Answer -Europe has two trade blocs
1. The European Union (EU) with 27
members
2. The European Free Trade Area
(EFTA) with 4 members
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