benefits of RTA

• What is trade creation?

  Trade creation is the removal of trade barriers between member countries of a bloc.
• What is the effect of trade creation on member countries?

  It results in increased specialization and trade between them.
• What does FDI stand for?

  FDI stands for Foreign Direct Investment.
• Why might MNCs wish to invest inside a trading bloc?

  To avoid the trade restrictions that exist for those outside the bloc.
• How does the removal of trade barriers affect multinational corporations (MNCs)?

  It encourages MNCs to invest within the trading bloc.
• What is the relationship between trade barriers and FDI?

  Trade barriers can lead MNCs to seek FDI within trading blocs.
• What is one benefit of a monetary union regarding trading costs?

  It simplifies trading costs
• How does a monetary union provide pricing transparency?

  By standardizing the currency used among member countries
• What monetary policy benefit might some member countries experience in a monetary union?

  Improved monetary policy conditions
• Why might European interest rates be lower in a monetary union?

  Because they are influenced by the collective monetary policy of the union
• What is one effect of using the same currency among member countries in a monetary union?

  There is less uncertainty surrounding exchange rates
• What do member countries of a monetary union share regarding currency?

  They all use the same currency
• What are the main benefits of a monetary union?

  • Simplifies trading costs
  • Provides pricing transparency
  • Improves monetary policy conditions
  • Reduces uncertainty surrounding exchange rates