Critics of the balance of payments approach to exchange rate determination point to the emphasis on ________ of currency and capital rather than ________ of money or financial assets.
A) flows; stocks
B) stocks; flows
C) import; export
D) export; import

Question

Quizplus · Accepted Answer

The balance of payments approach focuses on the flows of currency and capital between countries, which can have an impact on the exchange rate. Critics argue that this approach ignores stocks of money or financial assets, which can also influence exchange rates. Therefore, choice A (flows; stocks) is the best answer.

Critics of the Balance of Payments Approach to Exchange Rate