Question

A trading arrangement that eliminates most or all barriers to trade among participating nations and utilizes common barriers to trade with other countries outside the group is called a

	preferential trade agreement.
	free trade area.
	customs union.
	common market.
	economic union.

In a __________ countries breakdown trade barriers among participating nations, use common barriers to trade with nonmember countries and allow free movement of factors of production between member countries.

	preferential trade agreement
	free trade area
	customs union
	common market
	economic union

Economic union entails

	I.	free trade among member countries.
	II.	common barriers to trade for non-member countries.
	III.	free movement of factors of production between member countries.

	I only
	II only
	I and II only
	I and III only
	I, II and III

Which of the following forms of Regionalism have a common trade policy with outsiders?

	Custom Union
	Common Market
	Economic Union
	All of the above

Which of the following forms of Regionalism has a common currency?

	Custom Union
	Common Market
	Economic Union
	All of the above

NAFTA is a

	Free trade area
	Common Market
	Preferential trading arrangement
	All of the above

Answer 1

Trading arrangement that eliminates most or all barriers to trade among participating Nations and utilizes common barriers to trade with other countries outside the group is called a customs Union. The thing that distinguishes custom unions from a free trade area is that in free trade area there is no common barriers to trade rather each country has its own barriers for the countries outside the free trade area. But in the customs Union there is utilisation of common barriers to trade with other countries outside the group. So, Option first and second are incorrect.

Common market is the one in which in addition to trading arrangement that eliminates most or all barriers to trade among participating Nations and common barriers to trade outside the arrangement, it also includes free movement of factors of production like labour and capital within the group. So, Fourth Option is also incorrect.

Economic Union still goes further the common market in that there is how many nation or even unification of the monetary and fiscal policies of member states of the group. Thus, fifth Option is also incorrect.

Therefore, Third Option is correct i.e, Customs Union.