Trading Blocs 4.1.5

Question 1

What are the 4 Types of Trading Bloc

Answer 1

Free trade areas
Customs unions
Common markets
Monetary Unions

Question 2

Define Trading Blocs

Answer 2

An International agreement between countries that manage and promote trade activities

Question 3

What is a Free trade area

Answer 3

Trade barriers removed between members
Members can set their own barriers to non members

Question 4

What is a Customs union

Answer 4

Trade barriers removed between members
Common external tariff on imports for non members

Question 5

What is a Common market

Answer 5

Trade barriers removed between members
Common external tariff on imports for non members
Factors of production can move freely

Question 6

What is a Monetary union

Answer 6

Trade barriers removed between members
Common external tariff on imports for non members
Common Currency

Question 7

Effects of Trading Blocs on Trade

Answer 7

Trade Creation
Trade Diversion

Question 8

How do Trading Blocs create additional trade

Answer 8

The removal of trade barriers promote trade due to no tariffs

Question 9

How do Trading Blocs create trade diversion

Answer 9

Trading blocs divert trade away from non-members due to tariffs increasing the price of imports

Question 10

What does trade creation lead to and why

Answer 10

Leads to Consumer welfare due to increased trade and increased quantity of goods

Question 11

What does trade diversion lead to and why

Answer 11

Leads to decreased Living standards due to increased prices of goods due to tariffs