BUS 280 CHAPTER 9 AND 10 QUESTIONS AND
ANSWERS
Description of Regional Economic Integration - ANSWER Agreements among
countries in a geographic region to reduce, and ultimately remove, tariff and
non-tariff barriers to the free flow of goods, services and factors of production
between each other.
Difference between free trade and customs union - ANSWER All barriers to
the trade of goods and services among members are removed in free trade. A
customs union eliminates trade barriers between member countries and adopts a
common external trade policy.
How is a common market different from an economic union? - ANSWER In a
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. An economic union involves the 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 common monetary and fiscal policy.
2 Impediments to regional integration - ANSWER 1. While the nation as a
whole will benefit, certain groups may lose.
2. Concerns over national sovereignty
Define trade creation and trade diversion with respect to regional economic
integration - ANSWER Trade creation occurs when high-cost domestic
producers are replaced by low-cost producers within the free trade area.
Trade diversion occurs when lower-cost external suppliers are replaced by
higher-cost suppliers within the free trade are.
Two political factors that led to the creation of the European Union - ANSWER
1. The devastation of the two world wars and Europe's desire for lasting peace.
2. The desire for European nations to hold their own on the worlds political and
economic stage.
ANSWERS
Description of Regional Economic Integration - ANSWER Agreements among
countries in a geographic region to reduce, and ultimately remove, tariff and
non-tariff barriers to the free flow of goods, services and factors of production
between each other.
Difference between free trade and customs union - ANSWER All barriers to
the trade of goods and services among members are removed in free trade. A
customs union eliminates trade barriers between member countries and adopts a
common external trade policy.
How is a common market different from an economic union? - ANSWER In a
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. An economic union involves the 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 common monetary and fiscal policy.
2 Impediments to regional integration - ANSWER 1. While the nation as a
whole will benefit, certain groups may lose.
2. Concerns over national sovereignty
Define trade creation and trade diversion with respect to regional economic
integration - ANSWER Trade creation occurs when high-cost domestic
producers are replaced by low-cost producers within the free trade area.
Trade diversion occurs when lower-cost external suppliers are replaced by
higher-cost suppliers within the free trade are.
Two political factors that led to the creation of the European Union - ANSWER
1. The devastation of the two world wars and Europe's desire for lasting peace.
2. The desire for European nations to hold their own on the worlds political and
economic stage.
