Question

The use of countertrade in international trade ____________.

a) allows trade with countries short of hard currency.
b) reduces a firm's competitive advantage.
c) increases the tax liabilities of trading firms.
d) leads to a loss of revenue.
e) is considered unethical.

Answer 1

Countertrade in international trade allows countries with limited access to hard currency to engage in trade by using goods and services for payment instead of currency. It is a way to benefit from the global market and is generally accepted as a legal and valid trading method.

Step-by-step explanation:

The use of countertrade in international trade allows trade with countries short of hard currency. Countertrade refers to the practice of using goods and services as payment instead of currency. This is especially beneficial for countries that may not have access to sufficient hard currency but still wish to engage in international trade. Countertrade can come in different forms, such as bartering, counter purchase, offset agreement, switch trading, and buyback agreement.

Countertrade is used as an economic strategy to allow nations to trade and benefit from the global market despite currency restrictions. It also ties in with the understanding that international trade increases overall wealth and can potentially improve working conditions and incomes in the long run. Moreover, even though it has its challenges, countertrade is generally not viewed as unethical; instead, it is a valid and legal trading method acknowledged in international commerce.