Answer the following statements true (T) or false (F)

Question

1. An example of a trading bloc is the European Union. 
2. Mexico is part of NAFTA. 
3. The rate at which one country's currency can be swapped for another country's currency is called the substitution rate. 
4. An inherent weakness of the European Union is that stronger countries may have to rescue weaker ones that are in financial crisis. 

Answer 1

1. TRUE
A trading bloc, also known as an economic community, is a group of nations within a geographical region that has agreed to remove trade barriers with one another. The six major trading blocs are the NAFTA nations, the European Union, the ASEAN countries, the APEC countries, the Mercosur, and CAFTA.
2. TRUE
Formed in 1994, the North American Free Trade Agreement (NAFTA) is a trading bloc consisting of the United States, Canada, and Mexico.
3. FALSE
The exchange rate is the rate at which one country's currency can be exchanged for another country's currency.
4. TRUE
Formed in 1957, the European Union (EU) consists of 27 trading partners in Europe. In 2010 and 2011, the shaky finances and massive government debts of Portugal, Ireland, Italy, Greece, and Spain (so-called PIIGS) revealed an inherent weakness of the union, in that both weak and strong economies were expected to coexist. In early 2012, the EU was in full-blown crisis, and it was not clear whether stronger countries such as Germany and the Netherlands would back the rescue of PIIGS.