Starting from a position where the nation's money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?
Correct answer: A. decrease in the money supply
- A. decrease in the money supply
- B. increase in the money supply
- C. decrease in the money demand
- D. None of the above
Explanation
In the monetary approach, a reduction in money supply creates excess money demand, prompting capital inflows and an improvement in the balance of payments. Thus, the balance moves into surplus after a decrease in money supply.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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