According to the Monetary Approach to the Balance of Payments,a

question 5

Multiple Choice

According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:

• A)price stability
• B)fixed exchange rate
• C)price stability or fixed exchange rate
• D)price stability and fixed exchange rate

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Definitions:

Currency Exchange

The act of converting one country's currency into another's, a key component in international trade and investment activities.

Domestic Currency

The currency that is legally in use within a country's borders, serving as the medium for exchange, a store of value, and a standard of account.

Exchange Rate

The value of one currency when being converted to another currency.

Base Currency

The currency against which exchange rates are generally quoted in a given country, typically the currency of the home market.