The former USSR received technology and syrup from Pepsi and provided it with Soviet vodka and rights to distribute it in the US. This is an example of:
Options:
| A. Economic development B. Balance of payment C. Barter system D. International trade |
The Correct Answer Is:
C. Barter system
Correct Answer Explanation: C. Barter system
The correct answer is C. Barter system. The scenario described involves a barter agreement between the former USSR and Pepsi, where goods and services are exchanged directly without the use of money.
In this case, Pepsi provided technology and syrup, and in return, the USSR provided Soviet vodka and distribution rights in the US. This type of transaction is characteristic of a barter system, where the parties involved swap goods or services for mutual benefit.
The barter system is an ancient method of trade that predates the use of money. It involves the direct exchange of goods and services between two parties. In the case of the former USSR and Pepsi, this arrangement allowed both parties to acquire desired products without the need for currency.
Pepsi gained access to Soviet vodka and distribution rights in the US, while the USSR acquired technology and syrup.
The correct answer, the barter system, reflects a mode of trade that predates the widespread use of currency. In a barter system, goods and services are exchanged directly, without the need for money.
This arrangement between the former USSR and Pepsi highlights the flexibility and adaptability of trade, especially in unique circumstances where traditional monetary transactions may be challenging.
The exchange of technology and syrup from Pepsi for Soviet vodka and distribution rights in the US demonstrates a mutual understanding of each party’s needs and a willingness to engage in a non-traditional form of trade.
While barter systems are less common in today’s global economy, this historical example showcases how parties with different resources can find innovative ways to conduct business, fostering cooperation and benefiting both sides.
Now, let’s explore why the other options are not correct:
A. Economic development:
The described scenario does not align with the concept of economic development. Economic development refers to a sustained, long-term increase in the well-being, standard of living, and economic health of a population.
It often involves factors such as increased productivity, infrastructure development, technological advancements, and improved quality of life for citizens.
The barter agreement between the former USSR and Pepsi is a specific business transaction that may have benefits for both parties involved, but it does not contribute to the broader economic development of the nations involved or their populations.
B. Balance of payment:
The balance of payments is a comprehensive record of all economic transactions between a country and the rest of the world over a specific period. It includes the trade balance (exports and imports of goods and services), financial transactions, and transfers.
The scenario between the former USSR and Pepsi represents a singular business arrangement rather than a comprehensive analysis of a country’s overall balance of payments. The balance of payments is concerned with the aggregate economic interactions of a nation, while the described scenario is a specific trade deal between a company and a country.
D. International trade:
International trade typically involves the exchange of goods and services between countries using money as a medium of exchange. In contrast, the scenario between the former USSR and Pepsi is characterized by a barter system, where goods (technology, syrup, Soviet vodka) and services (distribution rights in the US) are exchanged directly without the use of currency.
While international trade usually leads to the specialization of production and mutual benefits for trading partners, it does not necessarily involve direct, non-monetary exchanges as seen in the described situation.
In essence, the key distinction lies in the nature of the exchange. The Pepsi-USSR scenario involves a specific barter agreement between two entities, whereas the concepts of economic development, balance of payment, and international trade encompass broader economic considerations that are not directly addressed by the described transaction.
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