In a Situation of a Fixed Exchange Rate, Explain Why

question 7

Essay

In a situation of a fixed exchange rate, explain why, in the monetary approach, an excess supply of money leads to a balance-of-payments deficit. Why is the deficit only temporary? How might advocates of the monetary approach explain a long-lasting deficit in the balance of payments?

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Definitions:

Antidepressants

Medications prescribed to treat depression and other conditions by altering brain chemistry.

Anxiety-Related Disorders

A group of mental health disorders characterized by significant feelings of anxiety and fear.

Benzodiazepines

A class of psychoactive drugs used to treat conditions such as anxiety, insomnia, and seizures by enhancing the effect of the neurotransmitter GABA in the brain.

Stimulants

Substances that increase activity, attention, and alertness by speeding up the messaging between the brain and the body.