Question 1

Which of the following led to the collapse of the Central American Common Market in 1969?

Accepted Answer

A)  Devaluation of the Brazilian currency by 40 percent
B)  A 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 SalvadorF) A) and C)
G) A) and B)

Question 2

Which of the following is a major issue confronting the North American Free Trade Agreement?

Accepted Answer

A)  Economic stability
B)  Reduction in purchasing power
C)  Political stability
D)  Expanding the membership of the agreement
E)  Lack of resourcesF) B) and E)
G) B) and D)

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true with regard to a free trade area?

Accepted Answer

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.F) C) and D)
G) B) and D)

Question 5

Which of the following is a reason why Mercosur was temporarily suspended in 2001?

Accepted Answer

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 crisisF) B) and E)
G) A) and E)

Question 6

In theory, the World Trade Organization rules should ensure that a free trade agreement results in trade diversion.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is considered to be the ultimate controlling authority within the European Union?

Accepted Answer

A)  Court of Justice
B)  European Commission
C)  European Council
D)  European Parliament
E)  European CommunityF) C) and E)
G) B) and C)

Question 8

Which of the following is true of Alexander Yeats's criticism of the Andean Pact?

Accepted Answer

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.F) A) and B)
G) A) and C)

Question 9

Which of the following is true of the East African Community (EAC) ?

Accepted Answer

A)  Its 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.F) A) and D)
G) B) and E)

Question 10

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

Accepted Answer

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.F) None of the above
G) D) and E)

Question 11

Which of the following refers to a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union?

Accepted Answer

A)  Andean Pact
B)  ASEAN
C)  Mercosur
D)  CARICOM
E)  Caribbean Single Market and EconomyF) A) and B)
G) A) and C)

Question 12

Which of the following is true with regard to an economic union?

Accepted Answer

A)  There are restrictions on immigration, emigration, or cross-border flow 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 that coordinates the economic, social, and foreign policy of the member-states.
E)  It does not adopt a common external trade policy.F) C) and E)
G) B) and D)

Question 13

Which of the following 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?

Accepted Answer

A)  Regional economic integration
B)  Cross-cultural integration
C)  Zoning agreement
D)  Administrative trade policies
E)  Balance-of-trade equilibriumF) C) and E)
G) A) and B)

Question 14

Describe the arguments for the North American Free Trade Agreement (NAFTA).

Accepted Answer

Proponents of NAFTA have argued that the...

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true with regard to regional economic integration?

Accepted Answer

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 has been most successful in Asia.F) A) and B)
G) None of the above

Question 17

Which of the following is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states?

Accepted Answer

A)  Free trade area
B)  Political union
C)  Economic union
D)  Common market
E)  Command economyF) A) and C)
G) A) and B)

Question 18

Some economists have pointed out that the benefits of regional integration are determined by the extent of trade diversion, as opposed to trade creation.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Define trade creation and trade diversion with respect to regional economic integration.

Accepted Answer

Trade creation occurs when high-cost dom...

Exam 9: Regional Economic Integration

Which of the following is true of Alexander Yeats's criticism of the Andean Pact?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states?

Correct AnswerverifiedShow Answer

In theory, the World Trade Organization rules should ensure that a free trade agreement results in trade diversion.

Correct AnswerverifiedShow Answer

Describe the arguments for the North American Free Trade Agreement (NAFTA).

Correct AnswerverifiedProponents of NAFTA have argued that the...View AnswerShow Answer

Which of the following is true with regard to regional economic integration?

Correct AnswerverifiedShow Answer

Which of the following 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?

Correct AnswerverifiedShow Answer

Which of the following is considered to be the ultimate controlling authority within the European Union?

Correct AnswerverifiedShow Answer

Define trade creation and trade diversion with respect to regional economic integration.

Correct AnswerverifiedTrade creation occurs when high-cost dom...View AnswerShow Answer

Which of the following is true of the East African Community (EAC) ?

Correct AnswerverifiedShow Answer

Which of the following led to the collapse of the Central American Common Market in 1969?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is true with regard to a free trade area?

Correct AnswerverifiedShow Answer

Which of the following is a reason why Mercosur was temporarily suspended in 2001?

Correct AnswerverifiedShow Answer

Which of the following refers to a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union?

Correct AnswerverifiedShow Answer

Which of the following is a major issue confronting the North American Free Trade Agreement?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Some economists have pointed out that the benefits of regional integration are determined by the extent of trade diversion, as opposed to trade creation.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is true with regard to an economic union?

Correct AnswerverifiedShow Answer

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Proponents of NAFTA have argued that the...
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Trade creation occurs when high-cost dom...
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