Which chain of events would promote payments equilibrium for a surplus nation,according to the price-adjustment mechanism?
A) Increasing money supply--increasing domestic prices--rising imports--falling exports
B) Increasing money supply--falling domestic prices--rising imports--falling exports
C) Decreasing money supply--increasing domestic prices--falling imports--rising exports
D) Decreasing money supply--decreasing domestic prices--falling imports--rising exports

Question

Quizplus · Accepted Answer

Increasing the money supply leads to higher domestic prices, which makes imports more attractive and exports less competitive, helping to reduce the surplus.

Which Chain of Events Would Promote Payments Equilibrium for a Surplus