Economic Integration

Multiple Choice

A group of countries that agree to reduce or eliminate trade barriers but each can have its own trade policy toward other countries have established a

• monetary union 

• free trade area

• customs union

• common market

Multiple Choice

A group of countries that allow free movement of labor and capital within the group have a

• customs union

• free trade area

• common market

• perferential trade agreement

Multiple Choice

A trading bloc may be a

• free trade area, customs union or common market

• customs union or common market 

• common market or monetary union 

• customs union or monetary union 

Multiple Choice

Trade creation and trade diversion may result from the creation of a trading bloc. Trade creation refers to the idea that _____________________ while trade diversion means that _____________________.

• lower cost producers are replaced by higher cost producers / higher cost producers are replaced by lower cost producers 

• higher cost producers are replaced by lower cost producers / lower cost producers are replaced by higher cost producers 

• trade expands through more exports and imports / trade contracts through fewer exports and imports 

• imports from efficient producers are replaced by imports from inefficient producers / imports from inefficient producers are replaced by imports from efficient producers 

Multiple Choice

Each of the following statements describes monetary union except 

• a group of countries that adopt a common currency

• a group of countries that have a common central bank

• a group of countries that have a common fiscal policy 

• a group of countries that have a common monetary policy

Multiple Choice

Countries in a monetary union 

• can exchange their various currencies at no cost between member states

• often face convergence requirements

• have greater flexibility when conducting monetary policy 

• can revalue or devalue their currency 

Multiple Choice

The World Trade Organization (WTO) does not

• monitor national trade policies 

• help member countries with technology and training in relation to trade 

• administer trade agreements 

• monitor the quality of goods traded across borders