In the price-specie-flow adjustment mechanism, a country with a balance-of-trade surplus Experiences
A) a gold inflow and a decrease in the price level.
B) a gold outflow and an increase in the money supply.
C) an increase in the money supply and a decrease in exports.
D) a decrease in the money supply and a decrease in imports.

Question

Quizplus · Accepted Answer

In the price-specie-flow mechanism, a trade surplus leads to a gold inflow, increasing the money supply, which can raise domestic prices and reduce exports.

In the Price-Specie-Flow Adjustment Mechanism, a Country with a Balance-Of-Trade