Chapter 9: Regional Economic Integration

True / False Questions

 

1. As with free trade in general, regional economic integration creates gain for consumers, but it
can be challenging for some producers. 
 
True    False
 
2. In a free trade area, all barriers to the trade of goods and services among member countries
are removed and a common external trade policy is adopted. 
 
True    False
 
3. The emphasis of the European Free Trade Association has been on free trade in consumer
goods. 
 
True    False
 
4. A common market has no barriers to trade among member-countries, includes a common
external trade policy, and allows factors of production to move freely among members. 
 
True    False
 
5. In a customs union, a common currency is adopted. 
 
True    False
 
6. A political union addresses the issue of how to make a coordinating bureaucracy accountable
to the citizens of member nations of an economic union. 
 
True    False
 
7. Economic theories suggest that free trade and investment is a positive-sum game, in which
all participating countries stand to gain. 
 
True    False
 
8. In terms of regional economic integration, linking neighboring economies and making them
increasingly dependent on each other creates incentives for political cooperation between the
neighboring states. 
 
True    False
 
9. To achieve full economic union, the European Union (EU) introduced a common currency,
the euro, controlled by a central EU bank. 
 
True    False
 
10. Some economists have pointed out that the benefits of regional integration are determined by
the extent of trade diversion, as opposed to trade creation. 
 
True    False
 
11. Trade creation occurs when lower-cost external suppliers are replaced by higher-cost
suppliers within the free trade area. 
 
True    False
 
12. In theory, the World Trade Organization rules should ensure that a free trade agreement
results in trade diversion. 
 
True    False
 
13. Of the two trade blocs in Europe, the European Union is by far the most significant, in terms
of membership as well as economic and political influence in the world economy. 
 
True    False
 
14. With the signing of the Treaty of Rome in 1957, the European Free Trade Association was
established. 
 
True    False
 
15. The European commission is the ultimate controlling authority within the European Union
because draft legislation from the commission can become EU law only if the council
agrees. 
 
True    False
 
16. The European Council is composed of one representative from the government of each
member-state but the membership varies depending on the topic being discussed. 
 
True    False
 
17. The European Parliament is responsible for proposing European Union (EU) legislation,
implementing it, and monitoring compliance with EU laws by member-states. 
 
True    False
 
18. The Court of Justice, which is comprised of one judge from each country, is the supreme
appeals court for European Union law. 
 
True    False
 
19. The European Parliament, which meets in Strasbourg, France, is primarily a legislative rather
than consultative body. 
 
True    False
 
20. The Single European Act proposed to abolish restrictions on cabotage by the end of 1992. 
 
True    False
 
21. By adopting the euro, the European Union has created the second most widely traded
currency in the world after that of the U.S. dollar. 
 
True    False
 
22. A disadvantage of the euro is that the development of a pan-European, euro-denominated
capital market will decrease the range of investment options open to both individuals and
institutions. 
 
True    False
 
23. 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. 
 
True    False
 
24. Since its establishment in January 1, 1999, the euro has steadily appreciated against the U.S.
dollar, reaffirming the ability of the European Central Bank to manage monetary policy
within the euro zone. 
 
True    False
 
25. The North American Free Trade Agreement (NAFTA) refers to the free trade area between
Canada, Mexico, and the United States. 
 
True    False
 
26. The most significant impact of the North American Free Trade Agreement has not been to
create the background for increased political stability in Mexico. 
 
True    False
 
27. The Andean Pact was largely based on the European Union model and was highly successful
at achieving its stated goals. 
 
True    False
 
28. The Andean Community now operates as a customs union. 
 
True    False
 
29. Mercosur originated in 1988 as a free trade pact between Chile and Argentina. 
 
True    False
 
30. A major stumbling block in the creation of the Free Trade Area of the Americas is that the
United States wants its southern neighbors to agree to higher manufacturing tariffs, which
they are not eager to embrace.
 
 
True    False
 
31. The basic objective of the Association of Southeast Asian Nations is to foster freer trade
among member countries and to achieve cooperation in their industrial policies. 
 
True    False
 
32. The stated aim of the Asia-Pacific Economic Cooperation is to increase multilateral
cooperation in view of the economic rise of the Pacific nations and the growing
interdependence within the region. 
 
True    False
 
33. Since the number of trade groups in the African continent is impressive, progress toward the
establishment of meaningful trade blocs has been fast. 
 
True    False
 
34. The creation of a single market through regional economic integration offers significant
opportunities because markets that were formerly protected from foreign competition are
increasingly open. 
 
True    False
 
35. An advantage of the emergence of single markets is that the lowering of barriers to trade and
investment among countries has led to decreased price competition throughout the European
Union. 
 
True    False
 
 

Multiple Choice Questions

 
36. _____  refers to agreements among countries in a geographic region to reduce and ultimately
remove tariff and nontariff barriers to the free flow of goods, services, and factors of
production between each other.  
 

A. Regional economic integration

B. Cross-cultural integration

C. Zoning agreement

D. Administrative trade policies

E. Balance-of-trade equilibrium
 
37. Which of the following is true with regard to regional economic integration?  
 

A. Agreements designed to promote freer trade within regions have failed to produce gains
from trade for all member countries.

B. World Trade Organization members are not required to notify the organization of any
regional trade agreements in which they participate.

C. Regional economic integration is good for consumers because it lowers prices.

D. Regional economic integration benefits producers because they do not have to adapt to a

more competitive environment.

E. The movement toward regional economic integration been most successful in Asia.
 
38. The movement toward regional economic integration has been most successful in _____.  
 

A. Africa

B. South America

C. North America

D. Europe

E. Asia
 
39. Which of the following is true of regional economic integration?  
 

A. Regional economic integration is good for producers because they do not have to adapt to
a more competitive environment.

B. By creating a single market, the EU aimed to lower the price for goods and services across
the bloc.

C. Regional economic integration poses a challenge for consumers as it increases the prices
of goods.

D. The members of the World Trade Organization have refused to participate in any regional
trade agreements.

E. Agreements designed to promote freer trade within regions have failed to produce gains
from trade for all member countries.
 
40. Which of the following is the economic level corresponding to the least integration?  
 

A. A free trade area

B. A customs union

C. A common market

D. An economic union

E. A political union

 
41. A(n) _____ is defined as a group of countries committed to removing all barriers to the free
flow of goods and services between each other, but pursuing independent external trade
policies.  
 

A. free trade area

B. command economy

C. efficient market

D. foreign exchange market

E. location economy
 
42. Which of the following is true with regard to a free trade area?  
 

A. Factors of production are allowed to move freely between member nations.

B. Each member country is allowed to determine its own trade policies with regard to
nonmembers.

C. Member nations are required to have a common currency.

D. Member nations are required to have a common monetary and fiscal policy.

E. Member nations are required to have a central political apparatus that coordinates
economic, social, and foreign policy.
 
43. _____ are the most popular form of regional economic integration, accounting for almost 90
percent of regional agreements.  
 

A. Licensing agreements

B. Economic unions

C. Common markets

D. Free trade agreements

E. Political unions
 
44. Which of the following is true of the theoretically ideal free trade area?  
 

A. Factors of production are allowed to move freely between member nations.

B. Member countries are not allowed to determine their own trade policies with regard to
nonmembers.

C. No discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to

distort trade between members.

D. Member nations are required to have a common currency.

E. Member nations are required to have a common monetary and fiscal policy.
 
45. Which of the following is true of the European Free Trade Association (EFTA)?  
 

A. The emphasis of EFTA has been on free trade in agricultural goods.

B. Industrial goods were left out of the trade arrangement, each member being allowed to
determine its own level of support.

C. Members cannot determine the level of protection applied to goods coming from outside
EFTA.

D. It was founded by those western European countries that initially decided not to be part of
the European Community.

E. It imposes a common tariff, of 5 to 20 percent, on products imported from outside.

 
46. Three countries enter into an agreement to remove all tariffs and trade barriers between them.
They decide on a common trade policy with regard to nonmembers. Faced with political
backlash, the countries stop short of allowing mobility of factors of production such as labor
and capital. Which of the following levels of economic integration best describes this
arrangement?  
 

A. Political union

B. Customs union

C. Common market

D. Economic union

E. Political union
 
47. A(n) _____ has no barriers to trade between member countries, includes a common external
trade policy, and allows factors of production to move freely between members.  
 

A. command economy

B. customs union

C. common market

D. efficient market

E. free trade area

 
48. Which of the following is a feature of a common market?  
 

A. Absence of a common external trade policy with regard to nonmembers

B. Allows free movement of factors of production between member nations

C. Establishment of barriers to the free flow of goods between member nations

D. Lack of administrative machinery to oversee trade relations with nonmembers

E. Requires the use of a common currency among member nations

 
49. Which of the following entails a closer economic integration and cooperation than a common
market?  
 

A. Command economy

B. Customs union

C. Efficient market

D. Free trade area

E. Economic union
 
50. Which of the following levels of economic integration involves the use of a common
currency, harmonization of members' tax rates, and a common monetary and fiscal policy?  
 

A. Free trade area

B. Customs union

C. Common market

D. Economic union

E. Command economy
 
51. Which of the following is true with regard to an economic union?  
 

A. There are restrictions on immigration, emigration, or cross-border flows of capital among

member-countries.

B. It entails less economic integration and cooperation than a common market.

C. It involves the free flow of products and factors of production among member-countries.

D. It is defined as a central political apparatus coordinates the economic, social, and foreign
policy of the member states.

E. It does not adopt a common external trade policy.

 
52. Which of the following is a solution to the issue of how to make a coordinating bureaucracy
accountable to the citizens of member nations?  
 

A. Establishment of a political union

B. Establishment of a customs union

C. Establishment of exclusive economic zones

D. Establishment of free trade agreements

E. Establishment of a common market

 
53. A(n) _____ is defined as a central political apparatus that coordinates the economic, social,
and foreign policy of the member states.  
 

A. free trade area

B. political union

C. economic union

D. common market

E. command economy
 
54. Which of the following supports the economic case for regional economic integration?  
 

A. International institutions such as the World Trade Organization have been moving the
world away from a free trade regime.

B. The greater the number of countries involved in a free trade agreement, the fewer
the perspectives that must be reconciled.

C. Coordination and policy harmonization problems are largely a function of the number of
countries that seek agreement.

D. It is difficult to establish a free trade and investment regime among a limited number of
adjacent countries as compared to the world community.

E. Since most governments do not intervene, unrestricted free trade and FDI have become a
reality.
 
55. Which of the following is true of the political case for regional economic integration?  
 

A. Linking neighboring economies increases the potential for violent conflict.

B. Free trade stimulates economic growth, which creates dynamic gains from trade.

C. Making neighboring economies increasingly dependent on each other fails to create

incentives for political cooperation.

D. Countries can enhance their political weight in the world by grouping their economies.

E. Those who have sought a united Europe have always had a desire to make another war in
Europe imminent.
 
56. Which of the following is a major consideration that underlay the establishment of the
European Community?  
 

A. The pressing need to have a common currency that would make trade between European
and non-European countries easier

B. The need for a united Europe to deal with the United States and the politically alien Soviet
Union

C. The economic lessons from the Great Depression that hit the United States in the 1920s

D. The success of the European Free Trade Association formed by Western European
countries in 1960

E. The rise of communism in Europe in the 1960s

 
57. Concerns about _____ arise because close economic integration demands that countries give
up some degree of their control over such key policy issues as monetary policy, fiscal policy,
and trade policy.  
 

A. job losses

B. national sovereignty

C. trade unionism

D. cultural uniformity

E. poverty
 
58. Which of the following are the two impediments to regional economic integration?  
 

A. Labor activism and political ideologies

B. Immigration and political ideologies

C. Costs and national sovereignty

D. Political will and popular support

E. Political ideologies and international policies

 
59. Which of the following is an example of concerns over national sovereignty acting as an
impediment to regional economic integration?  
 

A. The Organization of the Petroleum Exporting Countries regulating the supply of

petroleum as a cartel

B. The Asia-Pacific Economic Cooperation failing to establish itself as a regional

arrangement

C. Admission of Eastern European nations into the European Union

D. Great Britain refusing to adopt the common currency of the European Union, the euro

E. The rise of the World Trade Organization

 
60. _____ occurs when high-cost domestic producers are replaced by low-cost producers within
a free trade area.  
 

A. Value creation

B. Strategic pricing

C. Trade creation

D. Trade diversion

E. Economic exposure
 
61. _____ occurs when higher-cost external producers are replaced by lower-cost external
producers within the free trade area?  
 

A. Trade creation

B. Strategic pricing

C. Value creation

D. Trade diversion

E. Protectionism
 
62. _____ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within
a free trade area.  
 

A. Trade creation

B. Strategic pricing

C. Synergy

D. Trade diversion

E. Protectionism
 
63. A regional free trade agreement will benefit the world only if:  
 

A. it raises the standard of living in one of the member countries.

B. the amount of trade it creates exceeds the amount it diverts.

C. the currencies of the nations involved appreciates.

D. the balance-of-trade situation remains stable in the region.

E. it creates trade surplus for one of the countries involved.

 
64. The country of Argonia and the country of Berylia imposed tariffs on imports from all
countries. They set up a free trade area, removing all trade barriers between themselves but
maintaining tariffs on imports from the rest of the world. Argonia now begins to import sugar
from Berylia. Previously, Argonia was indigenously producing sugar at a higher cost. Thus,
Argonia benefits from this transaction. This is known as _____.  
 

A. trade creation

B. strategic pricing

C. synergy

D. trade diversion

E. protectionism
 
65. Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and
then they set up a free trade area, scrapping all trade barriers between themselves but
maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar
from Lithinia. However, Ceria had previously been importing sugar from another country,
Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is known as _____.

A. trade creation

B. strategic pricing

C. synergy

D. trade diversion

E. protectionism
 
66. Which of the following are significant trade blocs in Europe?  
 

A. The European Union and the European Free Trade Association

B. The European Federation and the European Trade Block

C. The European Commission and the COMINTERN

D. The European Federation and the European Trade Association

E. The European Economic Community and the European Federation

 
67. Which of the following is a factor that resulted in the establishment of the European Union
(EU)?  
 

A. The spectacular success of the North American Free Trade Agreement (NAFTA)

B. The trade impasse following the oil crisis in the 1970s that occurred due to collusion
among oil producing nations

C. The devastation of Western Europe during two world wars and the desire for a lasting
peace

D. The emergence of Japan as an economic and industrial superpower despite the nuclear
holocaust

E. The rise of communism in Europe

 
68. Which of the following organizations, established in 1951, was the forerunner of the
European Union?  
 

A. European Economic Community

B. European Coal and Steel Community

C. European Agricultural and Energy Union

D. European Textiles and Agricultural Community

E. European Foundation
 
69. The European Community was established with the signing of the _____ in 1957.  
 

A. Treaty of Paris

B. Treaty of Brussels

C. Treaty of Switzerland

D. Treaty of Rome

E. Treaty of Lisbon
 
70. The European Community became the European Union in 1993 following the ratification of
the _____.  
 

A. Maastricht Treaty

B. Warsaw Pact

C. Treaty of Rome

D. Single European Act

E. Lisbon Treaty
 
71. Which of the following is true of the Treaty of Rome?  
 

A. It obliged all European Union members to adopt the euro.

B. It committed the European Community to establish common policies in agriculture and
transportation.

C. It called for the establishment of internal trade barriers.

D. It allowed members to determine the level of protection applied to goods coming from
outside.

E. It called for the abolition of a common external tariff.

 
72. The _____ is responsible for proposing European Union legislation, implementing it, and
monitoring compliance with European Union laws by member states.  
 

A. Council of the European Union

B. European Commission

C. European Parliament

D. Court of Justice

E. European Community
 
73. Which of the following institutions has a monopoly in proposing European Union
legislation?  
 

A. Council of the European Union

B. Court of Justice

C. European Commission

D. European Parliament

E. European Community
 
74. Which of the following is true about the European Commission?  
 

A. The European Union’s competition commissioner has been gaining influence as the chief
regulator of competition policy in the member-nations of the European Union.

B. The European Commission has to be approved by the Council of the European Union
before it can begin work.

C. The European Commission does not have a policing role with respect to European
Union laws.

D. The legislation proposed by the European Commission goes directly to the European
Parliament.

E. The European Commission is the ultimate controlling authority within the European
Union.
 
75. Which of the following is considered to be the ultimate controlling authority within the
European Union?  
 

A. Court of Justice

B. European Commission

C. European Council

D. European Parliament

E. European Community
 
76. The European Council considered to be the ultimate controlling authority within the
European Union (EU) because:  
 

A. it monitors member states to make sure they are complying with EU laws.

B. it has a monopoly in proposing EU legislation.

C. it has 754 members that are directly elected by the populations of the member-states.

D. draft legislation from the European Commission can become EU law only if the council
agrees.

E. it is the supreme court for appeals for EU law.

 
77. The _____ is composed of one representative from the government of each member-state,
and whose membership depends on the topic being discussed.  
 

A. Court of Justice

B. European Council

C. European Commission

D. European Parliament

E. European Community
 
78. The _____, which has 754 members as of 2012, is directly elected by the populations of the
member-states. 
 

A. Court of Justice

B. European Council

C. European Commission

D. European Parliament

E. European Community
 
79. The _____, which meets in Strasbourg, France, is primarily a consultative rather than a
legislative body. It debates legislation proposed by the commission and forwarded to it by
the council.  
 

A. European Parliament

B. European Central Bank

C. Court of Justice

D. European Free Trade Association

E. European Community
 
80. Which of the following is true about the European Parliament?  
 

A. It cannot propose amendments to legislations.

B. It is directly elected by the populations of the member-states.

C. It is primarily a legislative body rather than a consultative body.

D. It does not have the right to veto laws such as single-market legislation.

E. The European Parliament does not have the right to vote on the appointment of
commissioners.
 
81. Which of the following is true of the Treaty of Lisbon that was signed in 2007?  
 

A. It defined the European Commission’s role in competition policy.

B. It brought the commission to the court for failure to act according to an European Union
treaty.

C. It created the position of the president of the European Council.

D. It lifted barriers to competition in the retail banking and insurance businesses.

E. It created the Court of Justice, the supreme appeals court for European Union law.
 
82. Which of the following is true of the Court of Justice? 
 

A. The judges are required to act as representatives of national interests.

B. It is comprised of several judges from a few selected countries.

C. It is the supreme appeals court for European Union law.

D. A member-country cannot bring another member-country to this court.

E. Member-countries cannot bring the commission or the council to this court.

 
83. Which of the following was a change proposed by the Single European Act?  
 

A. Establish frontier controls among European Community countries

B. Increase the resources required for complying with trade bureaucracy

C. Place barriers to competition in the retail banking and insurance businesses

D. Apply the principle of “mutual recognition” to product standards

E. Reduce costs directly by not allowing lower-cost suppliers into national economies
 
84. The _____ proposed that all impediments to the formation of a single market be eliminated
by December 31, 1992. The result was the Single European Act.  
 

A. Delors Commission

B. Andean Pact

C. D'Amato Act

D. North American Free Trade Agreement

E. Maastricht Treaty
 
85. Which of the following changes were proposed by the Single European Act?  
 

A. Place barriers to competition in the retail banking and insurance businesses

B. Place restrictions on foreign exchange transactions between member-countries

C. Increase the powers of the European Commission in matters of competitive policy

D. Encourage cabotage that refers to the right of foreign truckers to pick up and deliver
goods within another member-state’s borders

E. Open public procurement to nonnational suppliers

 
86. The right of foreign truckers to pick up and deliver goods within another member-state’s
borders is known as _____.  
 

A. affreightment

B. cabotage

C. dunnage

D. dumping

E. folkways
 
87. Which of the following principles did the Single European Act propose to apply to product
standards?  
 

A. The principle of "mutual recognition"

B. The principle of "quid pro quo"

C. The materiality principle

D. The principle of  "market-to-market"

E. The elimination principle

 
88. Which of the following is true of the Single European Act?  
 

A. The act proposed to place frontier controls among European Community countries.

B. The act sought to abolish the application of the principle of “mutual recognition” to
product standards.

C. The act proposed to reduce costs indirectly by preventing national suppliers to compete.

D. The act provided the impetus for the restructuring of substantial sections of European
industry.

E. The act proposed to reduce costs directly by preventing lower-cost suppliers into national
economies.
 
89. Which of the following treaties committed European Community members to adopt a
common currency by January 1, 1999?  
 

A. The Maastricht Treaty

B. The Treaty of Rome

C. The Treaty of
Lisbon

D. The Montreal Treaty

E. The Treaty of Paris

 
90. Which of the following comprises the euro zone?  
 

A. The 27 member nations of the European Union.

B. The member nations of the European Union and the applicants to the union

C. The 17 member nations who use euro as its currency

D. The member nations of the European Union and countries who have pegged their
currencies to the euro

E. The 21 member nations that have their members in the European Parliament
 
91. Which of the following countries has adopted the euro as its currency?  
 

A. Great Britain

B. France

C. Denmark

D. Sweden

E. Switzerland
 
92.
Which of the following is true with regard to establishment of the euro?

 
 

A. It required participating national governments to have a sound fiscal situation.

B. It required participating national governments to have stable exchange rates.

C. It required participating national governments to be democratic in nature.

D. It required participating national governments to give up control over monetary policy.

E. It required participating national governments to have a high degree of price stability.
 
93. Which of the following is true regarding the establishment of the euro?  
 

A. Great Britain, Denmark, and Sweden were among the first countries to adopt the euro.

B. Establishment of the euro did not require participating national governments to give up
their own currencies.

C. By adopting the euro, the European Union has created the second most widely traded
currency in the world after that of the U.S. dollar.

D. Establishment of the euro did not require participating national governments to give up
national control over monetary policy.

E. The governments of European countries routinely sacrifice national sovereignty for the
greater good.
 
94. Which of the following is a benefit of adopting the euro?  
 

A. The adoption of a common currency makes it easier to compare prices across Europe.

B. The adoption of a common currency makes Europe an optimal currency area.

C. The introduction of a common currency increases the range of investment options open

only to institutions.

D. The introduction of a common currency leads to higher prices which translate into
substantial gains for European producers.

E. The introduction of a common currency decreases competition because it has become

easier for consumers to shop around.
 
95. A key advantage of adopting the euro is that it:  
 

A. helps in reduction of competition in

Europe.

B. has prevented the development of a highly liquid pan-European capital market.

C. lowers foreign exchange and hedging costs in Europe.

D. insulates Europe from international competition.

E. increases the range of investment options open to institutions only.

 
96. Which of the following is true about how the euro will impact the pan-European capital
market?  
 

A. It will raise the cost of capital.

B. It will lead to a decline in the overall level of savings and investment.

C. It will increase efficiency with which investment funds are allocated.

D. It will lead to reduced liquidity in the market.

 
97. Which of the following is a drawback of adopting the euro?  
 

A. Loss of control over national monetary policy

B. Increase in the cost of capital

C. Reduction in the liquidity of capital markets

D. Reduction of price differentials within the euro zone

E. Loss of investment options open to both individuals and institutions

 
98. The Maastricht Treaty called for:  
 

A. establishment of the independent European Central Bank (ECB).

B. the abolition of restrictions on cabotage.

C. establishment of the European Parliament.

D. the formation of a single market for the European Union.

E. placing restrictions on foreign exchange transactions between member-countries.

 
99. Which of the following is a reason for Great Britain, Denmark, and Sweden to stay out of the
euro zone?  
 

A. The dollar peg advocated by some members of the European Union

B. The implied loss of national sovereignty to the European Central Bank

C. The volatility of the euro

D. The reluctance to compete directly against the U.S. dollar

E. The reluctance to be considered an optimal currency area

 
100 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. managed currency zone

B. open exchange regime

C. optimal currency area

D. free trade area

E. advanced monetary zone

 
101 Which of the following is true of the euro since its establishment in 1999?  
.  

A. The value of the euro has been stable against the U.S. dollar.

B. The euro's value has steadily appreciated against the U.S. dollar.

C. The euro's value initially appreciated and then steadily depreciated against the U.S. dollar.

D. The euro has had a volatile trading history against the U.S. dollar.

E. The value of the euro has been constant when compared to the U.S. dollar.
 
102 The _____ refers to a permanent bailout fund, worth about €500 billion, set up by the euro
. zone nations to restore confidence in the euro.  
 

A. European Fiscal Union

B. European Fiscal Compact

C. Troubled Assets Relief Program

D. European Stability Mechanism

E. European Financial Stability Facility

 
103 Which of the following is true of the criteria to qualify for membership to the European
. Union (EU)? 
 

A. The applicants were not required to privatize state assets.

B. The applicants were not required to adopt EU laws.

C. The applicants were required to tame inflation.

D. The applicants were required to refrain from restructuring industries.

E. The applicants were required to prevent deregulation of markets.

 
104 Which of the following is true of the provisions of the North American Free Trade
. Agreement?  
 

A. It does not allow financial institutions unrestricted access to the Mexican market.

B. It abolishes special treatment (protection) given to Mexican energy and railway
industries.

C. It allows lowering of national environmental standards to lure investment.

D. It seeks the removal of most barriers on the cross-border flow of services.

E. It does not deal with the protection of intellectual property rights.
 
105 Which of the following is a consequence of the implementation of the North American Free
. Trade Agreement?  
 

A. Low-skilled jobs will be moved out to Mexico resulting in lowering of average wage
rates in U.S. and Canada.

B. Increased imports from Mexico will help reduce the huge trade deficit for United States
and Canada.

C. Lower incomes of the Mexicans would allow them to import less U.S. and Canadian
goods, thereby decreasing demand.

D. A large number of Mexican firms will hire low-skilled workers from the United States.

E. Some U.S. and Canadian firms would move production to Mexico to take advantage of
lower labor costs.
 
106 An argument against the North American Free Trade Agreement centered on the fear that
. ratification would result in:  
 

A. low interest rates in the U.S. and Canada.

B. mass exodus of jobs from the United States into Mexico.

C. a move towards a common currency for NAFTA member-nations.

D. competition from the members of the European Union.

E. high inflation in the U.S. and Canada.

 
107 Which of the following is a significant impact of the North American Free Trade Agreement
. (NAFTA)?  
 

A. It led to decreased economic stability in Canada.

B. It led to a major trade deficit for Canada.

C. It helped create the background for increased political stability in Mexico.

D. It led to trade surplus for all the three member-nations.

E. It led to a reduction in purchasing power of consumers in America.

 
108 Which of the following is an issue confronting the North American Free Trade Agreement?  
.  

A. Economic stability

B. Reduction in purchasing power

C. Political stability

D. Expanding the membership of the agreement

E. Lack of resources
 
109 The _____ refers to a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru
. to establish a customs union.  
 

A. Andean Pact

B. ASEAN

C. Mercosur

D. CARICOM

E. Caribbean Single Market and Economy

 
110 Which of the following is true of the Andean Pact of 1969?  
.  

A. Political and economic problems seem to have hindered cooperation among member-
countries of the Andean Pact.

B. By the mid-1980s, the Andean Pact achieved most of its stated objectives.

C. The dominant political ideology in many of the Andean countries tended toward the
democratic end of the political spectrum.

D. The Galápagos Declaration effectively replaced the Andean Pact in 1997.

E. The Andean Pact sought to remove a common external tariff.

 
111 Which of the following is true of the Andean Pact during the mid-1980s?  
.  

A. Tariff-free trade existed between member countries.

B. Harmonization of economic policies between member countries had been achieved.

C. Successful integration of member economies had been achieved.

D. The Pact had failed to achieve the objective of a common external tariff.

E. The dominant political ideology in many of the Andean countries tended toward
democracy.
 
112 The Andean Community now operates as a _____.  
.  

A. common market

B. economic union

C. customs union

D. command economy

E. political union
 
113 _____ refers to the pact among Argentina, Brazil, Paraguay, and Uruguay that originated in
. 1988 to establish a free trade area.  
 

A. ASEAN

B. NAFTA

C. Mercosur

D. CARICOM

E. CAFTA
 
114 Which of the following is true of Alexander Yeats' criticism of the Andean Pact?  
.  

A. He pointed out that the slowest growing items in intra-Mercosur trade were cars, buses,
agricultural equipment, and other capital-intensive goods.

B. He believed that the trade creation effects of Mercosur outweighed its trade diversion
effects.

C. He felt that Mercosur countries were prepared to compete globally once the group’s
external trade barriers came down.

D. He pointed out that Mercosur countries were insulated from outside competition by tariffs
that run as high as 70 percent of value.

E. He felt that capital was being drawn toward more efficient enterprises.
 
115 Which of the following is a reason why Mercosur was temporarily suspended in 2001?  
.  

A. The dotcom bust in Paraguay

B. An economic crisis in Argentina

C. The exit of Uruguay from the group

D. The devaluation of the Mexican peso

E. The Venezuelan financial crisis 

 
116 The _____ refers to a trade pact among Costa Rica, El Salvador, Guatemala, Honduras, and
. Nicaragua, which began in the early 1960s but collapsed in 1969 due to war.  
 

A. Central American Common Market

B. Free Trade Area of the Americas

C. Caribbean Single Market and Economy

D. Mercosur

E. CARICOM
 
117 Which of the following led to the collapse of the Central American Common Market in
. 1969?  
 

A. Devaluation of the Brazilian currency by 40 percent

B. Coup in Nicaragua that led to the overthrow of the incumbent regime

C. War between Honduras and El Salvador after a riot at a soccer match between teams from
the two countries

D. Withdrawal from the trade arrangement by Costa Rica

E. Collapse of monetary policy between Costa Rica and El Salvador

 
118 The agreement of the member-states of the Central American Common Market joined by the
. Dominican Republic to trade freely with the United States is known as _____.  
 

A. Central American Free Trade Agreement

B. Central American Common Market

C. Free Trade Area of the Americas

D. CARICOM

E. Caribbean Single Market and Economy

 
119 Which of the following is the aim of the Central America Free Trade Agreement?  
.  

A. Lowering of trade barriers between the United States and the Central American Common
Market countries

B. Elimination of trade barriers between the CARICOM and Central American Common
Market countries

C. Reduction of trade barriers between Caribbean Single Market and Economy nations and
Central American Common Market countries

D. Introduction of a common currency for Costa Rica, El Salvador, Guatemala, Honduras,

and Nicaragua

E. Reductions in tariffs and quotas between Costa Rica, Dominican Republic, and Nicaragua
 
120 Which of the following refers to an association of English-speaking Caribbean states that are
. attempting to establish a customs union?  
 

A. CARICOM

B. Central American Free Trade Agreement

C. Central American Common Market

D. Free Trade Area of the

Americas

E. Caribbean Single Market and Economy

 
121 Which of the following is the goal of the Caribbean Single Market and Economy?  
.  

A. To remove all trade barriers between member nations in practice

B. To establish a political union

C. To adopt a common currency

D. To harmonize macroeconomic and monetary policy between member states

E. To establish an economic union

 
122 Which of the following is a major obstacle to the establishment of the Free Trade Area of the
. Americas?  
 

A. The United States wants its southern neighbors to agree to tougher enforcement of
intellectual property rights, which they do not want to embrace.

B. Some constituent nations insist on a common currency, an initiative that has not found
support among many nations.

C. Brazil and Argentina want the United States to open up critical industries such as telecom
and airlines.

D. The major trading blocks in the region, NAFTA and Mercosur, have opposed its
establishment.

E. There is no consensus on trade policies between Brazil and Argentina.

 
123 The _____ refers to an attempt to establish a free trade area between Brunei, Cambodia,
. Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.  
 

A. Asia-Pacific Economic Cooperation

B. South Asian Association for Regional Cooperation

C. Asian Clearing Union

D. Association of Southeast Asian Nations

E. Maastricht Treaty
 
124 Which of the following is true of the Asia-Pacific Economic Cooperation (APEC)?  
.  

A. It does not include the United States, Japan, and China.

B. The meeting of APEC members in Seattle in 1993 led to greater economic integration.

C. It was founded in 1990 at the suggestion of Australia.

D. APEC members signed a free trade agreement with China that removes tariffs on 90
percent of traded goods.

E. APEC members have established a free trade zone.

 
125 Which of the following is true with regard to the Asia-Pacific Economic Cooperation
. (APEC)?  
 

A. The stated aim of APEC is to increase multilateral cooperation in view of the economic
rise of the Pacific nations.

B. The goal of APEC is to reduce import tariffs among the six original members to zero.

C. APEC is the world’s largest free trade area.

D. Collectively, the member-states account for about 85 percent of the world’s GNP, 75
percent of world trade, and much of the growth in the world economy.

E. APEC currently has 25 member-states, including such economic powerhouses as

Germany, India, and Brazil.
 
126 Which of the following is true of the East African Community (EAC)?  
.  

A. Their program includes cooperation on immigration, road and telecommunication

networks, investment, and capital markets.

B. Its aim is to eliminate import tariffs among the six original members.

C. It is the world's largest free trade area.

D. It seeks to apply national environmental standards, provided such standards have a
scientific basis.

E. It seeks to protect intellectual property rights.

 
127 Which of the following is a threat facing the emergence of single markets?  
.  

A. Threat of getting engulfed in a trade

war

B. Increased price competition throughout the European Union

C. Increase in price differentials across nations

D. Reduced environmental standards in order to lure investments

E. Threat of greenfield investments