How would a clearing arrangement work between the Ukraine and Lithuania, whereby the Ukraine exports grain and Lithuania exports shoes?
What will be an ideal response?
Under a clearing arrangement, the Ukraine would export grain to Lithuania and Lithuania would export shoes to the Ukraine. Each of the two parties would agree to import a certain value of these goods from the other. A clearing account is established, and the values of the imports of grain and exports of shoes would be debited and credited over time as the shipments are made. The contract would probably specify an end date, and at that time, the Ukraine and Lithuania would settle any nonzero, residual balance with a final shipment of goods or a money payment.
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