Question

Which level of economic integration eliminates trade barriers between member countries and adopts a common external trade policy?

A) political union

B) customs union

C) common market

D) economic union

The ________ refers to the institutional arrangements that govern exchange rates.

A) World Bank

B) international monetary system

C) currency exchange

D) gold standard

What are two impediments to countries integrating?

Answer 1

There are various stages of economic integration out of which following 4 are defined to come up with the correct option:

A) political union: Also known as fiscal union aims at integrating monetary and fiscal policies and in such cases there are no trade barriers

B) customs union: This stage aims at eliminating barriers for exchange of goods tariffs/non tariffs, services, capital and labour, monetary policy is partially shared, within the trade bloc but non tariff, services, capital and labour cant move freely outside the trade bloc or externally

C) common market: This stage aims at eliminating barriers for exchange of goods with tariffs substantially but non tariffs goods, services, capital and labour barriers are only partially eliminated, both within the trade bloc and externally

D) economic union:This stage aims at eliminating barriers for exchange of goods tariffs/non tariffs, services, capital and labour, monetary policy is partially shared, within the trade bloc. Externally,barriers for exchange of goods on tariffs are also removed  but non tariff goods, services, capital and labour cant move freely outside the trade bloc or externally

Therefore, A is the correct answer.

The international monetary system refers to the institutional arrangements that govern exchange rates. World bank is an institution and not a set of rules. Gold Standard is a part of international monetary system therefore only a narrower aspect of the entire system. Currency exchange is not a standard terminology. So the correct answer is B