International Business 375 Chapter 9
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 the:
Central American Free Trade Agreement.
Which of the following is true of the Treaty of Rome?
It committed the European Community to establish common policies in agriculture and transportation.
Which of the following is true of the Treaty of Lisbon that was signed in 2007?
It created the position of the president of the European Council.
Which of the following is true of Alexander Yeats's criticism of the Andean Pact?
He pointed out that Mercosur countries were insulated from outside competition by tariffs that run as high as 70 percent of value.
Which of the following is true of the Court of Justice?
It is the supreme appeals court for European Union law.
Which of the following is true of the Single European Act?
It provided the impetus for the restructuring of substantial sections of European industry.
Which of the following is true of the provisions of the North American Free Trade Agreement?
It seeks the removal of most barriers on the cross-border flow of services.
Which of the following is true of the European Free Trade Association (EFTA)?
It was founded by those western European countries that initially decided not to be part of the European Community.
Which of the following is true of the Asia-Pacific Economic Cooperation (APEC)?
It was founded in 1990 at the suggestion of Australia.
The European Community became the European Union in 1993 following the ratification of the:
Maastricht Treaty.
Which of the following refers to a pact that originated in 1988 to establish a free trade area now including Argentina, Brazil, Paraguay, and Uruguay?
Mercosur
Which of the following are significant trade blocs in Europe?
The European Union and the European Free Trade Association
Which of the following is true about the European Commission?
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.
Which of the following is true of the Andean Pact during the mid-1980s?
The Pact had failed to achieve the objective of a common external tariff.
Establishment of the euro required participating national governments to:
give up control over monetary policy.
Which of the following is the economic level corresponding to the least integration?
A free trade area
Which of the following is a reason why Mercosur was temporarily suspended in 2001?
An economic crisis in Argentina
Which of the following refers to a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union?
Andean Pact
Which of the following was a change proposed by the Single European Act?
Apply the principle of "mutual recognition" to product standards
Which of the following refers to an association of English-speaking Caribbean states that are attempting to establish a customs union?
CARICOM
Which of the following 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?
Central American Common Market
Which of the following has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members?
Common market
Which of the following supports the economic case for regional economic integration?
Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.
Which of the following proposed that all impediments to the formation of a single market be eliminated by December 31, 1992, resulting in the Single European Act?
Delors Commission
Which of the following is true with regard to a free trade area?
Each member country is allowed to determine its own trade policies with regard to nonmembers.
Which of the following entails a closer economic integration and cooperation than a common market?
Economic union
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?
Economic union
Where has the movement toward regional economic integration been most successful?
Europe
Which of the following has 754 members as of 2014, and is directly elected by the populations of the member-states?
European Parliament
Which of the following meets in Strasbourg, France, is primarily a consultative rather than a legislative body, and debates legislation proposed by the commission and forwarded to it by the council?
European Parliament
Which of the following refers to a permanent bailout fund, worth about €500 billion, set up by the euro zone nations to restore confidence in the euro?
European Stability Mechanism
Which of the following countries has adopted the euro as its currency?
France
Which of the following is a feature of a common market?
Free movement of factors of production between member nations
Which of the following is a threat facing the emergence of single markets?
Increased price competition throughout the European Union
Which of the following is true about the European Parliament?
It is directly elected by the populations of the member-states.
Which of the following is true of the East African Community (EAC)?
Its program includes cooperation on immigration, road and telecommunication networks, investment, and capital markets.
Which of the following is a drawback of adopting the euro?
Loss of control over national monetary policy
The European Community was established with the signing in 1957 of the Treaty of:
Rome.
Which of the following is an expected consequence of the implementation of the North American Free Trade Agreement?
Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.
Over time the euro will impact the pan-European capital market by leading to:
an increased efficiency with which investment funds are allocated.
The Andean Community now operates as a(n):
customs union.
The Maastricht Treaty called for:
establishment of the independent European Central Bank (ECB).
A benefit of adopting the euro as a common currency is that it:
makes it easier to compare prices across Europe.
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 in a(n):
optimal currency area.
Which of the following is a significant impact of the North American Free Trade Agreement (NAFTA)?
It helped create the background for increased political stability in Mexico.
Which of the following is true with regard to an economic union?
It involves the free flow of products and factors of production among member countries.
Which of the following is the aim of the Central America Free Trade Agreement?
Lowering of trade barriers between the United States and the Central American Common Market countries
Which of the following comprises the euro zone?
The 18 member nations who use the euro as their currency
Which of the following treaties committed European Community members to adopt a common currency by January 1, 1999?
The Maastricht Treaty
Which of the following led to the collapse of the Central American Common Market in 1969?
War between Honduras and El Salvador after a riot at a soccer match between teams from the two countries
A key advantage of adopting the euro is that it:
lowers foreign exchange and hedging costs in Europe.
An argument against the North American Free Trade Agreement centered on the fear that ratification would result in:
mass exodus of jobs from the United States into Mexico.
Establishment of which of the following would hold a coordinating bureaucracy accountable to the citizens of member nations?
A political union
Which of the following refers to an attempt to establish a free trade area between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam?
Association of Southeast Asian Nations
Which of the following are the two impediments to regional economic integration?
Costs and national sovereignty
Which of the following is true of the political case for regional economic integration?
Countries can enhance their political weight in the world by grouping their economies.
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?
Customs union
Which of the following institutions has a monopoly in proposing European Union legislation?
European Commission
Which of the following is responsible for proposing European Union legislation, implementing it, and monitoring compliance with European Union laws by member-states?
European Commission
Which of the following is considered to be the ultimate controlling authority within the European Union?
European Council
Which of the following is a major issue confronting the North American Free Trade Agreement?
Expanding the membership of the agreement
Which of the following are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements?
Free trade agreements
Which of the following 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?
Free trade area
Which of the following is an example of concerns over national sovereignty acting as an impediment to regional economic integration?
Great Britain refusing to adopt the common currency of the European Union, the euro
Which of the following is true of the Andean Pact of 1969?
Political and economic problems seem to have hindered cooperation among member countries of the Andean Pact.
Which of the following is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states?
Political union
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?
Regional economic integration
Which of the following is true with regard to regional economic integration?
Regional economic integration is good for consumers because it lowers prices.
Which of the following is a major obstacle to the establishment of the Free Trade Area of the Americas?
The United States wants its southern neighbors to agree to tougher enforcement of intellectual property rights, which they do not want to embrace.
Which of the following is true of the criteria to qualify for membership to the European Union?
The applicants were required to tame inflation.
Which of the following is a factor that resulted in the establishment of the European Union (EU)?
The devastation of Western Europe during two world wars and the desire for a lasting peace
Which of the following is true of the euro since its establishment in 1999?
The euro has had a volatile trading history against the U.S. dollar.
Which of the following is a reason for Great Britain, Denmark, and Sweden to stay out of the euro zone?
The implied loss of national sovereignty to the European Central Bank
Which of the following is a major consideration that underlay the establishment of the European Community?
The need for a united Europe to deal with the United States and the politically alien Soviet Union
Which of the following is true with regard to the Asia-Pacific Economic Cooperation (APEC)?
The stated aim of APEC is to increase multilateral cooperation in view of the economic rise of the Pacific nations.
Which of the following is the goal of the Caribbean Single Market and Economy?
To harmonize macroeconomic and monetary policy between member-states
Which of the following occurs when high-cost domestic producers are replaced by low-cost producers within a free trade area?
Trade creation
Which of the following occurs when lower-cost external suppliers are replaced by higher-cost suppliers within a free trade area?
Trade diversion
The European Council is considered to be the ultimate controlling authority within the European Union (EU) because:
draft legislation from the European Commission can become EU law only if the council agrees.
A regional free trade agreement will benefit the world only if:
the amount of trade it creates exceeds the amount it diverts.
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.
trade creation
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:
trade diversion
