In the price-specie-flow mechanism, there is a gold __________ a country with a balance-Of-trade surplus, and this gold flow ultimately leads to __________ in the surplus Country's exports.
A) inflow into; an increase
B) inflow into; a decrease
C) outflow from; an increase
D) outflow from; a decrease

Question

Quizplus · Accepted Answer

The price-specie-flow mechanism, as described by David Hume, posits that a country with a trade surplus will experience an inflow of gold. This inflow increases the money supply, leading to inflation, which in turn makes the country's goods more expensive abroad and reduces its exports.

In the Price-Specie-Flow Mechanism, There Is a Gold __________ a Country