According to the portfolio balance approach,an increase in domestic wealth leads domestic residents to increase the demand for the:
A)domestic money
B)domestic bond
C)foreign bond
D)all of the above

Question

Quizplus · Accepted Answer

The portfolio balance approach suggests that an increase in domestic wealth would lead domestic residents to diversify their portfolios by increasing their holdings in a variety of assets, including domestic money, domestic bonds, and foreign bonds. This diversification is driven by the desire to balance risk and return across different types of investments.

According to the Portfolio Balance Approach,an Increase in Domestic Wealth