An Agreement That Involves Two or More Countries That Not

question 23

Multiple Choice

An agreement that involves two or more countries that not only agree to eliminate tariffs and other trade restrictions on most or all mutual trade,but also agree to a common set of trade barriers to imports from non-member countries,is called a(n)

• A) free trade area.
• B) customs union.
• C) common market.
• D) economic and monetary union.
• E) political union.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, considering all payments of principal and interest at expected times.

Zero-Coupon Bond

A Zero-Coupon Bond is a debt security that does not pay interest (coupon) during its life but is issued at a substantial discount to its face value, with the face value being repaid at maturity.

Forward Interest Rate

An interest rate agreed upon for a loan or investment in the future, often derived from the yield curve of current interest rates.

Liquidity Preference Theory

A theory suggesting that investors demand higher yields on securities with longer maturities due to the preference for liquidity and lower risk associated with shorter-term securities.