Chapter 6

Question 1

Letter of credit

Answer 1

Or L/C, stands at the center of international commercial transactions.
Issued by a bank at the request of an importer, the letter of credit states that the bank will pay a specified sum of money to a beneficiary

Question 2

Draft. Or bill of exchange

Answer 2

Instrument normally used in international commerce to effect payment

Question 3

Challenges to exporting

Answer 3

• Voluminous paperwork.
• Complex formalities.
• Potential delays and errors.
• Time and costs are daunting to inexperienced exporters.

Question 4

Types of countertrades

Answer 4

Barter, counter purchase, offset, switch trading and buyback.

Question 5

Countertrade

Answer 5

Is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.
Denotes a range of barter like agreements; its principle is to trade goods and services for other goods and
services when they cannot be traded for money

Question 6

Factors that have facilitated the increase in exports in recent years

Answer 6

Decline in trade barriers and increase in regional economic agreements, advances in technology and
communication

Question 7

Regional economic integration opportunities

Answer 7

Opens new markets; allow firms to realize cost economies by centralizing production in those locations

Question 8

Economic Integration

Answer 8

Agreements that reduce trade barriers and align policies among countries

Question 9

Political union

Answer 9

A central political apparatus coordinates the economic, social, and foreign policy of the member states

Question 10

Free trade area

Answer 10

All barriers to trade of goods and services among member countries are removed