Starting from a Position Where a Nation's Money Demand Equals

question 4

Multiple Choice

Starting from a position where a nation's money demand equals the money supply and its balance of payments is in equilibrium.According to the monetary approach to the balance of payments,when the nation's central bank increases money supply,the balance of trade moves into ________ position and net official holding of foreign reserves ________.

• A) surplus; increases
• B) surplus; decreases
• C) deficit; increases
• D) deficit; decreases

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Definitions:

Consignee

The retailer in a consigned inventory arrangement.

Retailer

A business entity that sells goods or services directly to consumers through various distribution channels to earn a profit.

Current Replacement Cost

The amount of money it would cost to replace an asset at the present time, considering its current condition.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy.