When do firms engage in countertrade?
A)When the exporter may not be paid in his/her home currency due to nonconvertibility
B)When the exporter can convert the currency only in U.S.dollars
C)When the exporter is dealing with a country that has huge foreign reserves
D)When the exporter has easy access to export credit to fund its international trade

Question

Quizplus · Accepted Answer

A government may restrict the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports.This is problematic for exporters as nonconvertibility implies that the exporter may not be paid in his/her home currency;and few exporters would desire payment in a currency that is not convertible.Countertrade is a common solution.

When Do Firms Engage in Countertrade