Lecture Notes February 24

Lecture Notes February 24 - Lecture Notes February 24, 2011...

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Lecture Notes February 24, 2011 A.)The Economic Effects of RTA’s a. Trade Creation: occurs when the formation of a FTA or CU leads to a switching of imports from a high-cost source to a low-cost source, tends to improve welfare b. Trade Diversion: occurs when imports switch from a low-cost source to a high-cost source tends to worse welfare c. d. Forming a trade block causes high price production B.)Other Gains from RTA a. Increase in competition can reduce prices b. Increase in competition can lower costs of production c. Firms can expand scale of production to exploit the economies of scale d. Increase opportunities for business C.)The European Union (generally well-received) a. Set of agreements among countries of Western Europe in the realms of economics, foreign and security policies and justice and home affairs b. 1992 marked the official completion of a common market in which barriers to labor and physical capital to be removed, the actual completion of a common market is still in process c. Has ventured beyond a common market to a monetary union with the euro d. A current preoccupation of the EU is the issue of enlargement i. Expanding membership: Croatia, Turkey, Macedonia, Albania, Serbia, Montenegro, Bosnia ii. Crucial sticking point, political stability and sound economic performance of potential EU members e. On balance, has been a positive impacting agreement among member countries, overall some have a more cautionary view,
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Lecture Notes February 24 - Lecture Notes February 24, 2011...

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