The ________ Approach Argues That Equilibrium Exchange Rates Are Achieved

question 38

Multiple Choice

The ________ approach argues that equilibrium exchange rates are achieved when the net inflow of foreign exchange arising from current account activities is equal to the net outflow of foreign exchange arising from financial account activities.

• A) balance of payments
• B) monetary
• C) asset market
• D) law of one price

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Definitions:

Loanable Funds

The money available for borrowing in the financial markets, coming from savings that consumers and businesses want to lend out.

Trade Deficits

A situation where the value of a country's imports exceeds the value of its exports.

Net Exports

The value of a country's total exports minus its total imports, representing the net effect of foreign trade on an economy’s spending.

Foreign Currency Exchange

The system or process of converting one country's currency into another, facilitating international trade and investment.