Which Feature of a Customs Union Differentiates It from a Free

question 11

Multiple Choice

Which feature of a customs union differentiates it from a free trade area?

• A) Harmonization of members' tax rates
• B) A common currency
• C) A common external trade policy toward nonmembers
• D) Ability of factors of production to move freely between members

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Definitions:

Liquidity Preference

The desire of consumers and businesses to hold onto cash or easily convertible assets rather than making long-term investments or transactions.

Supply and Demand

The fundamental economic model for price determination in a market, describing the relationship between the quantity of a good that producers wish to sell at various prices and the quantity that consumers wish to buy.

Interest-Rate Effect

The interest-rate effect describes how changes in the central bank's interest rate influence the level of overall spending in the economy by affecting borrowing costs.

Price Level

A measure of the average of current prices across the entire spectrum of goods and services produced in the economy.