Ch 25 - Economic Integration

Inefficiencies firms

________ within the union are favoured more over efficient firms outside the union.

Bilateral agreements

________: between two countries → easier to implement.

Monetary union

________: agreement between two or more countries creating a single currency.

Trade diversion

________: when the entry of a country into a customs union leads to the protection of a good or service.

Multilateral agreements

________: between two or more countries → beneficial to more people.

Bilateral agreements

between two countries → easier to implement

Multilateral agreements

between two or more countries → beneficial to more people

Trading bloc

an agreement where trade barriers ar reduced or eliminated among participating members

Trade creation

occurs when the entry of a country into a custom union leads to the production of a good or service transforming from a high-cost producer to a low-cost producer

Trade diversion

when the entry of a country into a customs union leads to the protection of a good or service

Monetary union

agreement between two or more countries creating a single currency

Transparency

International price of goods can be easily compared

lower transaction costs

single currency, no need to change currency

certainty

price changes are more predictable

Loss of economic sovereignty

individual countries cannot set their own interest rates