In the Monetary Approach to the Balance of Payments and the Exchange

question 12

Multiple Choice

In the monetary approach to the balance of payments and the exchange rate,

• A) an increase in the demand for money (with a fixed supply) would cause a balance-of-Payments deficit under fixed exchange rates.
• B) an increase in the supply of money (with a fixed demand) would cause a balance- Of-payments surplus under fixed exchange rates.
• C) a decrease in the demand for money (with a fixed supply) would cause a balance-of- Payments deficit under fixed exchange rates.
• D) an increase in the supply of money (with a fixed demand) would cause the domestic Currency to appreciate under flexible exchange rates.

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Definitions:

Subsidiary Profits

Earnings generated by a subsidiary that contribute to the income and financial standing of its parent company.

Fair Value

Refers to the estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Issued Capital

The total value of a company's shares that have been sold to shareholders.

Tax Rate

is the percentage at which an individual or corporation is taxed by the government.