Theory question 106
Foreign Trade(a) Explain three means of payment in international trade and two means of payment in home trade.
(b) Explain five reasons countries engage in international trade.
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(a) International trade (any three, explained): bill of exchange/documentary bill; letter of credit (importer's bank guarantees payment to exporter); bank draft drawn on a foreign bank; telegraphic/electronic (SWIFT) transfer; travellers' cheques; credit/debit cards accepted abroad; open account.
Home trade (any two, explained): cash; cheques; bank transfer/mobile money; POS (debit/credit cards); postal and money orders.
(b) Any five, explained: uneven distribution of natural resources; differences in climate; differences in technology and skills; comparative cost advantage (each country specialises in what it produces most cheaply); to dispose of surplus output; to obtain goods a country cannot produce; wider market and economies of scale; to earn foreign exchange; to promote friendly relations among countries; to get variety of goods.
Keep home-trade and international-trade methods separate.