If the increase in a nation's money supply grows less rapidly than its GNP,the nation will face a:
A)once-and-for-all balance of payments deficit
B)once-and-for-all balance of payments surplus
C)continuous balance of payments deficit
D)continuous balance of payments surplus

Question

Quizplus · Accepted Answer

If the increase in a nation's money supply grows less rapidly than its GNP, the nation will have a continuous balance of payments surplus. This is because the nation's currency will become relatively more valuable, leading to an increase in demand for its exports and a decrease in demand for imports. The nation's exports will be cheaper, and its imports will become more expensive. This will lead to a surplus in the balance of payments, as the nation's exports exceed its imports.

If the Increase in a Nation's Money Supply Grows Less