Which approach analyzes a nation's balance of payments in terms of money demand and money supply?
A) Expenditures approach
B) Absorption approach
C) Elasticities approach
D) Monetary approach

Question

Quizplus · Accepted Answer

The monetary approach to balance of payments analysis focuses on the money demand and money supply in a nation's economy. It analyzes the impact of monetary policy on exchange rates and balance of payments. The expenditures approach looks at the balance of payments in terms of the country's exports and imports, while the absorption approach focuses on the relationship between domestic output and disposable income. The elasticities approach looks at how changes in prices and incomes affect the demand for exports and imports.

Which Approach Analyzes a Nation's Balance of Payments in Terms