DREXEL INTB 200 FINAL REVIEW QUESTIONS
Regional Economic Integration - Answers - agreements between countries in a
geographic region to reduce tariff and non-tariff barriers to the free flow of goods,
services, and factors of production between each other
Levels of Regional Economic Integration - Answers - 1. Free Trade Area
2. Customs Union
3. Common Market
4. Economic Union
5. Political Union
Free Trade Area - Answers - eliminates all barriers to the trade of goods and services
among member countries
ex. NAFTA: US, Canada, Mexico
EFTA: Norway, Iceland, Lichtenstein, Switzerland
Customs Union - Answers - eliminates trade barriers between member countries and
adopts an external trade policy
ex. Andean Community: Peru, Bolivia, Colombia, Ecuador
Common Market - Answers - has no barriers to trade between member countries, a
common external trade policy, and the free movement of the factors of production
ex. MERCOSUR: Brazil, Argentina, Paraguay, Uruguay
Economic Union - Answers - has the free flow of products and factors of production
between members, a common external trade policy, a common currency, a harmonized
tax rate, and a common monetary and fiscal policy
ex. The EU
Political Union - Answers - involves a central political apparatus that coordinates the
economic, social, and foreign policy of member states
ex. The United States
Reasons that countries should integrate their economies - Answers - All countries gain
from free trade and investment, regional economic integration is an attempt to exploit
the gains from free trade and investment
Linking countries together to make them more dependent of each other, creates
incentives for political cooperation and reduces the likelihood of violent conflict among
member countries, gives countries greater political standings when dealing with other
nations
, Efforts that Limit Integration - Answers - Economic Integration can be difficult because:
a nation as a whole may benefit from regional economic integration, yet some groups
may lose
implies loss of sovereignty
Economic Integration is only beneficial if the amount of trade it creates exceeds the
amount of trade it diverts
The European Union , Background - Answers - Created after WWI & WWII, Europe
wanted long-lasting peace and to hold their own on the world's political and economic
stage
Forerunner was the European Coal & Steel Community (1951)
The European Economic Community (1957) was formed at the Treaty of Rome with
goal of becoming a common market
The Single European Act (1987)
The Single European Act - Answers - 1987
committed the EC countries to work towards a single market to be established by
December 31st 1992
created out of frustration from EC members that the community was not living up to its
promise
provided the force of the restructuring of substantial sections of European industry
allowing for faster economic growth than what otherwise would be the case
trade diversion - Answers - occurs when high cost suppliers within the free trade area
replace the low cost external supplies
trade creation - Answers - occurs when low cost producers within the free trade area
replace the high cost domestic producers
The European Council - Answers - the ultimate controlling authority within the EU
The European Commission - Answers - responsible for proposing EU legislation,
implementing it, and monitoring compliance with EU laws by member states
The European Parliament - Answers - debates legislation proposed by the commission
and forwarded it to by the council
The Court of Justice - Answers - the supreme appeals court for the EU
The Maastricht Treaty - Answers - committed the EU to adopt a single currency
created the second largest currency zone in the world after the US dollar
used by 17 of the 27 member states
Britain, Denmark, and Sweden opted out
Regional Economic Integration - Answers - agreements between countries in a
geographic region to reduce tariff and non-tariff barriers to the free flow of goods,
services, and factors of production between each other
Levels of Regional Economic Integration - Answers - 1. Free Trade Area
2. Customs Union
3. Common Market
4. Economic Union
5. Political Union
Free Trade Area - Answers - eliminates all barriers to the trade of goods and services
among member countries
ex. NAFTA: US, Canada, Mexico
EFTA: Norway, Iceland, Lichtenstein, Switzerland
Customs Union - Answers - eliminates trade barriers between member countries and
adopts an external trade policy
ex. Andean Community: Peru, Bolivia, Colombia, Ecuador
Common Market - Answers - has no barriers to trade between member countries, a
common external trade policy, and the free movement of the factors of production
ex. MERCOSUR: Brazil, Argentina, Paraguay, Uruguay
Economic Union - Answers - has the free flow of products and factors of production
between members, a common external trade policy, a common currency, a harmonized
tax rate, and a common monetary and fiscal policy
ex. The EU
Political Union - Answers - involves a central political apparatus that coordinates the
economic, social, and foreign policy of member states
ex. The United States
Reasons that countries should integrate their economies - Answers - All countries gain
from free trade and investment, regional economic integration is an attempt to exploit
the gains from free trade and investment
Linking countries together to make them more dependent of each other, creates
incentives for political cooperation and reduces the likelihood of violent conflict among
member countries, gives countries greater political standings when dealing with other
nations
, Efforts that Limit Integration - Answers - Economic Integration can be difficult because:
a nation as a whole may benefit from regional economic integration, yet some groups
may lose
implies loss of sovereignty
Economic Integration is only beneficial if the amount of trade it creates exceeds the
amount of trade it diverts
The European Union , Background - Answers - Created after WWI & WWII, Europe
wanted long-lasting peace and to hold their own on the world's political and economic
stage
Forerunner was the European Coal & Steel Community (1951)
The European Economic Community (1957) was formed at the Treaty of Rome with
goal of becoming a common market
The Single European Act (1987)
The Single European Act - Answers - 1987
committed the EC countries to work towards a single market to be established by
December 31st 1992
created out of frustration from EC members that the community was not living up to its
promise
provided the force of the restructuring of substantial sections of European industry
allowing for faster economic growth than what otherwise would be the case
trade diversion - Answers - occurs when high cost suppliers within the free trade area
replace the low cost external supplies
trade creation - Answers - occurs when low cost producers within the free trade area
replace the high cost domestic producers
The European Council - Answers - the ultimate controlling authority within the EU
The European Commission - Answers - responsible for proposing EU legislation,
implementing it, and monitoring compliance with EU laws by member states
The European Parliament - Answers - debates legislation proposed by the commission
and forwarded it to by the council
The Court of Justice - Answers - the supreme appeals court for the EU
The Maastricht Treaty - Answers - committed the EU to adopt a single currency
created the second largest currency zone in the world after the US dollar
used by 17 of the 27 member states
Britain, Denmark, and Sweden opted out
