AGB 302 QUIZ 5 AGB 302 QUIZ 5
Study online at https://quizlet.com/_6gxtes
1. free trade area all barriers to the trade of goods and services among member countries are
removed. In the theoretically ideal free trade area, no discriminatory tariffs, quotas,
subsidies, or administrative impediments are allowed to distort trade between
mem-bers. Each country, however, is allowed to determine its own trade policies
with regard to nonmembers. Thus, for example, the tariffs placed on the products
of nonmember coun-tries may vary from member to member.
2. customs union eliminates trade barriers between member countries and adopts a common ex-
ternal trade policy.
3. 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. Labor and capital are
free to move because there are no restrictions on immigration, emigration, or
cross-border flows of capital among member countries.
4. economic union involves the free flow of products and factors of production among member coun-
tries and the adoption of a com-mon external trade policy, but it also requires a
common currency, harmonization of mem-bers' tax rates, and a common monetary
and fiscal policy.
5. political union in which a central political apparatus coordinates the economic, social, and foreign
policy of the member states.
6. Trade creation occurs when high-cost domestic producers are replaced by low-cost pro-ducers
within the free trade area. It may also occur when higher-cost external producers
are replaced by lower-cost external producers within the free trade area.
7. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers
within the free trade area.
8. European Council represents the interests of member states. It is clearly the ulti-mate controlling
authority within the EU because draft legislation from the commission can become
1/4
Study online at https://quizlet.com/_6gxtes
1. free trade area all barriers to the trade of goods and services among member countries are
removed. In the theoretically ideal free trade area, no discriminatory tariffs, quotas,
subsidies, or administrative impediments are allowed to distort trade between
mem-bers. Each country, however, is allowed to determine its own trade policies
with regard to nonmembers. Thus, for example, the tariffs placed on the products
of nonmember coun-tries may vary from member to member.
2. customs union eliminates trade barriers between member countries and adopts a common ex-
ternal trade policy.
3. 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. Labor and capital are
free to move because there are no restrictions on immigration, emigration, or
cross-border flows of capital among member countries.
4. economic union involves the free flow of products and factors of production among member coun-
tries and the adoption of a com-mon external trade policy, but it also requires a
common currency, harmonization of mem-bers' tax rates, and a common monetary
and fiscal policy.
5. political union in which a central political apparatus coordinates the economic, social, and foreign
policy of the member states.
6. Trade creation occurs when high-cost domestic producers are replaced by low-cost pro-ducers
within the free trade area. It may also occur when higher-cost external producers
are replaced by lower-cost external producers within the free trade area.
7. Trade diversion occurs when lower-cost external suppliers are replaced by higher-cost suppliers
within the free trade area.
8. European Council represents the interests of member states. It is clearly the ulti-mate controlling
authority within the EU because draft legislation from the commission can become
1/4
