The Main Difference Between a Free Trade Area and a Customs

question 13

Multiple Choice

The main difference between a free trade area and a customs union is that the members of a customs union ________.

• A) agree to the free movement of all factors of production
• B) harmonize their tax, monetary, and fiscal policies and create a common currency
• C) agree to treat trade with all nonmember nations in a similar manner, by having a common external tariff.
• D) accept a common stance on economic and political policies regarding nonmember nations

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Definitions:

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid.

Cash Basis

An accounting method where revenues and expenses are recognized when cash is received or paid, not when incurred.

Operations

The day-to-day activities required for the running of a business or an organization, focusing on the production and delivery of goods and services.

Noncash Investing

Transactions that involve the acquisition or disposal of non-monetary assets through means other than direct cash payment.