Question

A trading arrangement that commits participating nations to remove all barriers to trade among their group, to abide by common restrictions on trade with other countries outside the group, to allow unhindered movements of factors of production within the group, and to closely coordinate all economic policies with other participants is known as:

Select one:

a. a free trade area.

b. a common market.

c. a customs union.

d. an economic union.

Answer 1

Answer - Free trade area is the arrangement where member eliminate all barriers to trade. But they can practice these barriers to non member countries.

In Custom union these members start using common barriers to non member countries. This is an advance economic integration than free trade area.

In common market, member countries removes all barriers, place common trade barriers to non members and movement of factor production is allowed within member countries. This is more advance economic integration than custom union.

This is more advance economic integration than common market. In it member nations remove all barriers to trade among their group; they place common trade restrictions on trade with other countries outside the group. It allows movements of factors of production within the group, and to closely coordinate all economic policies with other participant, this type of arrangement is known as Economic Union.

Option D is the correct.