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60 Cards in this Set
- Front
- Back
The European union is primarily intended to permit
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Free movement of resources and products among member nations
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Which of the following represents the stage where economic integration is leastcomplete
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Free trade area
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Customs union theory reasons that the formationof a customs union will decrease members real welfare when the
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Trade diversioneffect exceeds the trade creation effect
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Which economic integration scheme is solely intended to abolish trade restrictions among member countries while setting up common tariffs against nonmembers
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Customs union
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Assume that te formation of a customs union turns out to include the lowest-cost world producerof the product in question. Which effect could not occur for the participating countries
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Trade diversion
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Which organization of nations permits free trade among it's members in industrial goods while each member maintainsfreedon in it's trade policies toward non-member countries
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North American free trade association
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Whichfoem of economic integration occurs when participating countries abolish tariffs on trade among themselves, establish a common tariff on imports from nonmembers, and permit a free movement of capital and labor within the organization
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Common market
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A static welfare effect effect resulting from the formation of the European union would be
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Trade diversion
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A dynamic welfare gain resulting fromthe formation o the euro union would be
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Economies of scale
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Which organization was founded in 1957 whose objective was to create an economic union among it's members
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European union
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Which nation is not a Mende of the north American free trade association
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Greenland
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The European union has achieved all of the following except
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Adopted a common fiscal policy for member nations
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Which country isnot a member of the European union
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Iceland
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The implementation o the European union has
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Made it harder for Americans to competeagainst the Germans in the British market
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The common agricultural policy of the European union has
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Decreased American farm exports to the EU
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Consider 8.1 with free trade, Greece imports
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5 calculators from germany
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Consider figure 8.1 assume Greece levies a per-unit tariff of $20 on imports from both Germany and france
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1 calculator from germany
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Referring to figure 8.1 suppose Greece forms a customs union with France. Greece will import
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3 calculators at a per unit price of $30
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Suppose that steel from japan faces a 20 percent tariff in France and a 25 percent tariff in Italy, while France and Italy maintain free trade between each other France and Italy are therefore part of an
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Free trade area
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Suppose that mexicoand Canada form a free trade area, mexicans then decrease auto mfg and increase imports o autos from Canada while the canadiens decrease computer production and import more computers from Mexico. This is an example of:
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Trade creation
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Suppose that the united kingdom and Italy abolish all tariffs on each others goals and all restrictions on movements of factors of productionbetween them. They Lao implement a common protectionist policy toward other countries. Thi is an example of an:
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Common market
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In the united states, which group was most likely to be hurt by the North American Free Trade Agreement?
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unskilled labor
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The failure of the centrally-planned economies was exemplified by all of the following except:
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interest rates that were below free-market levels
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The transition of the former communist countries to market economies requires:
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Privatization of public property
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In the former Soviet Union, major manufacturing firms were typically
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Owned and operated by the government
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The former communist countries included all of the following except:
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Austria
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The economic reforms of the early 1990s that occurred in the former Soviet Union and Eastern Europe resulted in:
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A movement from centrally-planned economies toward market economies
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Suppose that Canada has domestic firms that could supply its entire market for radios at a price of $50, while U.S. firms could supply radios at $40 and Mexico at $30. Suppose that Canada initially has a 50 percent tariff on imports of radios and then forms a free trade area with the United States. As a result, Canada realizes:
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Trade diversion, trade creation, and potential overall welfare gains
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As of 2002, members of the European Monetary Union agreed to replace their currencies with the:
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euro
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The formation of the European Monetary Union is expected to entail benefits for member countries which include all of the following except:
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Independent monetary policies run by the central bank of each member country
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A main disadvantage of the European Monetary Union is that:
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Each member country loses the use of monetary policy as to tool to combat recession
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A common market
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Allows the imposition of common external trade barriers against non-members
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On the balance-of-payments statements, merchandise imports are classified in the:
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Current account
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Which of the following is considered a capital inflow?
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A sale of U.S. financial assets to a foreign buyer
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Which of the following is classified as a credit in the U.S. balance of payments?
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U.S. exports
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Which of the following indicates the international investment position of a country at a given moment in time?
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The balance of international indebtedness
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Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of goods and services, which comprises part of the country's gross domestic product?
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Goods and services account
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If the United States government sells military hardware to Saudi Arabia, the transaction would be recorded on the U.S. balance of payments as a:
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Current account credit
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The current account of the U.S. balance of payments does not include:
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The sale of securities to foreigners
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The value to American residents of income earned from overseas investments shows up in which account in the U.S. balance of payments?
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Current account
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Consider Table 10.2. The U.S. balance of international indebtedness suggests that the United States is a net:
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Creditor
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For the first time since World War I, in 1985 the United States became a net international:
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Debtor
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A country that is a net international debtor initially experiences:
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An augmented savings pool available to finance domestic spending
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Credit (+) items in the balance of payments correspond to anything that:
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Involves receipts from foreigners
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Debt (-) items in the balance of payments correspond to anything that:
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Involves payments to foreigners
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When all of the debit or credit items in the balance of payments are combined:
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The total surplus or deficit equals zero
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In the balance of payments, the statistical discrepancy is used to:
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Ensure that the sum of all debits matches the sum of all credits
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The role of ____ is to direct one nation's savings into another nation's investments:
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Capital flows
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When a country realizes a deficit on its current account:
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It becomes a net demander of funds from other countries
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Reducing a current account deficit requires a country to:
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Increase private saving relative to investment
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Reducing a current account surplus requires a country to:
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Increase the government's deficit and increase private investment relative to saving
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The burden of a current account deficit would be the least if a nation uses what it borrows to finance:
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Investment on plant and equipment
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Economic integration is the process of eliminating restrictions on international trade, payments, and factor mobility.
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True
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When a group of countries establish a free-trade area, they achieve the highest stage of economic integration.
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False
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Trade creation and trade diversion refer to the short run (static) effects of economic integration while economies of scale, stimulus to investment, and effects on competition refer to the long run (dynamic) effects.
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true
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Referring to the balance-of-payments statement, an international transaction refers to the exchange of goods, services, and assets between residents of one country and those abroad.
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true
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The balance of payments includes international transactions of households and businesses, but not government.
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false
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Because the balance of payments utilizes double-entry accounting, merchandise exports will always be in balance with merchandise imports.
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false
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The "goods and services" account of the balance of payments shows the monetary value of international flows associated with transactions in goods, services, and unilateral transfers.
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false
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A positive balance on the goods-and-services account of the balance of payments indicates an excess of exports over imports which must be added to the nation's gross domestic product.
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true
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