Under the Price-Specie-Flow Mechanism, What Happens When, Say, Great Britain's

question 62

Multiple Choice

Under the price-specie-flow mechanism, what happens when, say, Great Britain's current account surplus is greater than its non-reserve financial account balance?

• A) Great Britain's loans will finance all foreign net imports.
• B) An automatic drop in Great Britain's domestic prices and rise in foreign prices.
• C) Gold reserves will flow into Great Britain.
• D) Gold reserves will flow out of Great Britain.
• E) Great Britain will experience a deficit.

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Definitions:

Restructuring

The process of reorganizing a company's structure, finances, or operations to improve efficiency or to adapt to new market conditions.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows.

Total Value

The combined market value of all the assets owned by an entity.

Optimal Capital Structure

The best mix of debt and equity financing that minimizes a company's cost of capital and maximizes its stock price.