Final answer:
The arrangement between Global Petroleum and Saudi Arabia to build refinaries and receive oil as payment is an example of a Buyback. It highlights how countertrade can be beneficial when the trade terms are more favorable than a country's opportunity cost, leading to gains from trade.
"The correct option is approximately option A"
Step-by-step explanation:
The scenario described between Global Petroleum and Saudi Arabia is an example of a Buyback. This type of international trade arrangement is where a company agrees to build factories or infrastructure in a country and is repaid over time with products produced by those investments. In this case, Global Petroleum is building refineries and is compensated with oil over 20 years.
The exchange is a part of a larger concept known as countertrade, which is a practice of bartering goods for goods rather than using currency transactions.
Gains from trade are fundamental in international economics. For example, if Saudi Arabia can exchange 20 barrels of oil for 20 units of corn whilst maintaining a consumption level of 40 barrels of oil and increasing corn consumption to 30, it is beyond their production possibility frontier, meaning they benefit from the trade. This stems from the concept of opportunity cost; trading at a ratio more favorable than the country's opportunity cost results in gains.