The price-specie-flow mechanism suggested that
A) a country could easily maintain a balance-of-payments surplus for a long period ofTime.
B) a deficit country would experience an increase in its money supply and its price level.
C) a surplus country would experience an increase in its money supply and its price level.
D) a country's internal price level has no relation to the country's foreign trade activities.

Question

Quizplus · Accepted Answer

The price-specie-flow mechanism, as described by David Hume, posits that a country with a trade surplus would see an inflow of gold (specie), which would increase the money supply and, consequently, the price level in that country. This process would eventually self-correct imbalances in trade.

The Price-Specie-Flow Mechanism Suggested That