(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...

Answer Details

(a) Means of payment in international trade: 1. Letter of credit: It is a document issued by a bank on behalf of the buyer, guaranteeing the seller will receive the payment in full and on time. 2. Bill of exchange: It is a written order by the exporter to the importer to pay a certain amount on a certain date, with the bank serving as an intermediary. 3. Telegraphic transfer: It is a method of transferring funds electronically between banks, with the payment being made immediately upon receipt of the transfer. Means of payment in home trade: 1. Cash: It is the most common and simple means of payment in home trade, involving the exchange of physical currency. 2. Credit: It is a means of payment in which the seller allows the buyer to purchase goods or services on the promise of future payment. (b) Reasons for countries engaging in international trade: 1. Access to resources: Countries engage in international trade to obtain resources that are not available in their own country, or are available in insufficient quantities. 2. Economies of scale: By producing on a larger scale, countries can reduce their average cost of production and achieve greater efficiency. 3. Specialization: Countries can specialize in the production of goods and services in which they have a comparative advantage, and trade with other countries for the goods and services they are not efficient in producing. 4. Increased competition: International trade creates greater competition, leading to improvements in product quality and lower prices for consumers. 5. Increased exports: By engaging in international trade, countries can increase their exports and generate revenue, which can help to improve their balance of trade and boost their economy.