According to the monetary approach to the balance of payments,a surplus nation will have to give up in the long-run its goal of:
A)price stability
B)fixed exchange rate
C)price stability or fixed exchange rate
D)price stability and fixed exchange rate

Question

Quizplus · Accepted Answer

The monetary approach to the balance of payments suggests that a surplus nation, in the long run, cannot maintain both price stability and a fixed exchange rate simultaneously. It must choose between the two due to the inherent pressures that a balance of payments surplus places on domestic prices and the exchange rate.

According to the Monetary Approach to the Balance of Payments,a