Which of the following is true of countertrade?
A) The governments of developing nations sometimes insist on a certain amount of countertrade.
B) Countertrade is a means of structuring an international sale when conventional means of payment are cost-effective.
C) Nonconvertibility is an advantage for exporters.
D) Nonconvertibility implies that the exporter will only be paid in his or her home currency.
E) Most exporters desire payment in a currency that is not convertible.

Question

Quizplus · Accepted Answer

The governments of developing nations may require or insist on a certain amount of countertrade to support local industries or conserve foreign exchange reserves. This practice is common in countries where foreign exchange reserves are limited or where there are restrictions on the movement of capital. Countertrade thus provides a means to facilitate international trade in such circumstances. Option B is incorrect as countertrade is resorted to because conventional means of payment are not feasible. Option C is incorrect as nonconvertibility is a disadvantage for exporters as it limits their ability to convert the foreign currency received into their home currency, and they may face difficulty in deploying the funds received. Option D is incorrect as nonconvertibility implies that the exporter may have to be paid in a currency other than his or her home currency. Option E is incorrect as most exporters prefer payment in a currency that is freely convertible.

Which of the Following Is True of Countertrade