| What is Economic Integration? | -Refers to where Economies of Different Nations become more Closely Linked
-Can be due to Free Trade Agreements, or Common Currencies |
| What are the Stages of Economic Integration? | -They are the types of Trading Blocs - so Free Trade Areas, Custom Unions. Monetary Union
-USMCA and ASEAN are examples of being at the First Stage of Economic Integration (Free Trade Area)#
-The EU is a Customs Union, whilst the Eurozone is a Monetary Union |
| What are the Positive Impacts of Economic Integration? | -Trade Creation can occur within a Trading Bloc. Tariffs are Stripped and Consumers can have more choice
-More Trade leads to Greater Efficiency, due to more Competition, Specialization, and Economies of Scale.
-Even Non Members may benefit, as those Improvements within the Bloc will cause the Price of their Exports to fall.
-Removing Tariffs will increase Consumer Surplus |
| What are the Negative Impacts of Economic Integration? | -Trade Diversion may occur when Trade Barriers divert Trade Away from Cheaper, Efficient Non-Members.
-This can thus lead to no Increase In Trade, and efficiency being Reduced as Trade is Diverted to Less Efficient Producers, and Non-Members are not Able to fully their competitive advantage. This will harm the long-run |
| What are the Positive Benefits of a Monetary Union? | -A Single Currency allows Nations to not consider Costs referring to Buying another Currency when they buy Goods and Services from Monterey Union Members. Price Comparisons more Simple
-No Exchange Rate Risk when trading Within the Monetary Union
-Fiscal and Monetary Policies which Nations in a Monetary Union may be more Helpful in the Long Run, such as Fiscal Rules? |
| What are the Negative Outcomes from a Monetary Union | -Policies that suit the whole union may be Unhelpful for Individual Nations. For Example, Interest Rates may rise which may harm an Individual Nation in a Recession
-Nations lose a bit of Sovereignty. This comes in the form of a loss in Monetary Policy as they can not set their Interest Rate to help with their Macroeconomic Objectives. Only the Central bank can |
