The Basic Premise of the Monetary Approach Is That

question 52

Multiple Choice

The basic premise of the monetary approach is that:

• A) Exchange rate movements change according to uncontrolled shocks.
• B) Holdings of international reserves should be minimized.
• C) Any balance of payments disequilibrium is based on a monetary disequilibrium.
• D) People's willingness to hold money can alter exchange rates but not the balance of payments.

---

Definitions:

Present Value

The actual value today of future monetary amounts or cash flow series, determined by a specified rate of return.

Future Amounts

The value of a current asset or amount of money at a specified future date, considering interest or inflation.

Future Value

The value of an investment at a specified date in the future that is equivalent in value to a specified sum today after being compounded over time.

Interest Rate

The portion of a total amount of money levied for borrowing it, usually represented as a yearly rate.