(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.
(a)(i) Means of Payment in International Trade: (i) Bills of exchange:- It is an instrument drawn through the banking system to pay an oversea seller for goods bought by an importer from another country. (ii) Travellers cheques:- These are special cheques issued by banks to its customers to enable them make payment while outside the country. (iii) Debit Cards:-These are issued by banks to their customers to enable them pay for goods and services online, provided they have money in their accounts. (iv) International bank draft: It is a cheque issued by a local bank, payable overseas on its own agent and handover to the buyer. (v) Credit transfer:-lt is an arrangement by which funds are transferred from one local person’s account to another in a foreign country by bank.
(ii) Means of payment in home trade: (i) Cash:- Local currency can be handed over to the seller as a means of payment. (ii) Point of Sales (POS):- Payment can be made through point of sale terminals using credit or debit cards. (iii) Bank app: Payment could be made directly by the buyer from their phones using bank applications (bank app). (iv) Local bank draft:- This is a cheque issued by a local bank payable within the country in the name of the seller.
(b) Reasons Countries Engage in International Trade: (i) Uneven distribution of natural resources- Some countries have abundance of certain natural resources for example oil while others do not. There is therefore need for trade to occur in order to obtain those resources. (ii) Differences in technology:- Differences in skills and technology necessitates trade as countries that do not have certain technology or skills in producing certain goods or services depend on others. (iii) Access to Wider marKet: The need to access a wider market for goods and services leads to international trade as surplus goods and services need to be exported. (iv) Need to access wide varieties of goods: Countries engage in international trade so as to obtain a variety of products so as to satisfy the different tastes of its consumers. (v) Seasonal products:- Some products are seasonal in nature and countries have to import them when they are no longer available.