Question

What is the difference between a free trade association, a common market, and an economic union?

a. They are different terms for the same economic integration level.
b. A common market includes a common currency; an economic union does not.
c. A free trade association allows for free movement of goods; a common market includes free movement of goods, services, and people; an economic union goes further by coordinating economic policies.
d. A common market focuses on political integration, while an economic union emphasizes economic cooperation.

Answer 1

The differences relate to levels of economic integration: free trade associations permit trade without duties among members, common markets add shared external trade policies, and economic unions also coordinate fiscal and monetary policies.

Step-by-step explanation:

The difference between a free trade association, a common market, and an economic union lies in the level of integration and cooperation among member countries. A free trade association offers free trade in goods between its members while allowing each country to determine its own external trade policy. In contrast, a common market involves not only free trade within the group but also requires a shared external trade policy. An economic union is an advanced stage that encompasses all the features of a common market with the added coordination of fiscal and monetary policy between member countries. A prominent example is the European Union (EU), which started as a free trade association, developed into a common market, and eventually became an economic union with a common currency, the euro, and other integrated policies to facilitate the free movement of goods, labor, and capital.