AGB Chapter 9 AGB Chapter 9
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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
members. Each country, however, is allowed to determine its own trade policies
with regard to nonmembers.
2. European Free Norway, Iceland, Liechtenstein, and Switzerland—down from seven in 1995 (three
Trade Association EFTA members—Austria, Finland, and Sweden—joined the EU on January 1,
(EFTA) 1996); founded by those western European countries that initially decided not to
be part of the European Community (the forerunner of the EU)
3. customs union eliminates trade barriers between member countries and adopts a common ex-
ternal trade policy. Establishment of a common external trade policy necessitates
significant administrative machinery to oversee trade relations with nonmembers.
4. 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.
5. economic union free flow of products and factors of production among member countries and
the adoption of a common external trade policy, but it also requires a common
currency, harmonization of members' tax rates, and a common monetary and
fiscal policy; an economic union entails even closer economic integration and
cooperation than a common market
6. political union a central political apparatus coordinates the economic, social, and foreign policy
of the member states
7. Trade creation high-cost domestic producers are replaced by low-cost producers within the free
trade area.
8. Trade diversion lower-cost external suppliers are replaced by higher-cost suppliers within the free
trade area.
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Study online at https://quizlet.com/_8tyxhb
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
members. Each country, however, is allowed to determine its own trade policies
with regard to nonmembers.
2. European Free Norway, Iceland, Liechtenstein, and Switzerland—down from seven in 1995 (three
Trade Association EFTA members—Austria, Finland, and Sweden—joined the EU on January 1,
(EFTA) 1996); founded by those western European countries that initially decided not to
be part of the European Community (the forerunner of the EU)
3. customs union eliminates trade barriers between member countries and adopts a common ex-
ternal trade policy. Establishment of a common external trade policy necessitates
significant administrative machinery to oversee trade relations with nonmembers.
4. 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.
5. economic union free flow of products and factors of production among member countries and
the adoption of a common external trade policy, but it also requires a common
currency, harmonization of members' tax rates, and a common monetary and
fiscal policy; an economic union entails even closer economic integration and
cooperation than a common market
6. political union a central political apparatus coordinates the economic, social, and foreign policy
of the member states
7. Trade creation high-cost domestic producers are replaced by low-cost producers within the free
trade area.
8. Trade diversion lower-cost external suppliers are replaced by higher-cost suppliers within the free
trade area.
1
1/3
