International Business quiz 9

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 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

Establishment of the euro required participating national governments to

give up control over monetary policy.

A key advantage of adopting the euro is that it

lowers foreign exchange and hedging costs in Europe.

The euro zone is comprised of the

not:21 member nations that have their members in the European Parliament.

Finland and Portugal have different wage rates, tax regimes, and business cycles. The two countries have also reacted differently in the past to external economic shocks. The dissimilarities are an example of one of the drawbacks of the euro that economists refer to as the EU not being in a(n)

optimal currency area

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

As with free trade in general, regional economic integration creates gain for consumers, but it can be challenging for some producers.

true

Economic theories suggest that free trade and investment is a positive-sum game, in which all participating countries stand to gain.

true

The ________ is a 1969 agreement among Bolivia, Chile, Ecuador, Colombia, and Peru to establish a customs union.

Andean Pact

________ is 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 is an example of concerns over national sovereignty acting as an impediment to regional econoEstablishment of the euro required participating national governments to mic integration?

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

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

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

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

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

Which of the following is an expected consequence of the implementation of the North American Free Trade Agreement?

Correct Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

Which of the following is true about the European Commission?

Correct 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.

The European Council is considered to be the ultimate controlling authority within the European Union (EU) because

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

Which of the following was a major consideration that underlay the establishment of the European Economic Community?

Correct he need for a united Europe to deal with the United States and the politically alien Soviet Union

Three countries, close to each other in the Pacific Rim, 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

The six countries in the northern side of the Pacific Rim agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to as a

regional economic integration.

A regional free trade agreement will benefit the world only if

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