With floating exchange rates,BOP equilibrium is restored by
A)trade restrictions.
B)earnings from foreign investments.
C)exchange rate changes.
D)All of the above.

Question

Quizplus · Accepted Answer

With floating exchange rates, BOP equilibrium is restored by exchange rate changes. This is because floating exchange rates allow the exchange rate to adjust freely, thereby automatically balancing the current account and capital account of the BOP. Trade restrictions and earnings from foreign investments may affect the BOP, but they do not directly restore BOP equilibrium with floating exchange rates.

With Floating Exchange Rates,BOP Equilibrium Is Restored by