According to the monetary approach,when a monetary disequilibrium exists,either ____________ or _____________ has to adjust depending on the type of exchange rate system.
A) the balance of payments; domestic production
B) the balance of payments; exchange rate value
C) domestic production; exchange rate value
D) domestic production; foreign inflation rate

Question

Quizplus · Accepted Answer

According to the monetary approach, a monetary disequilibrium occurs when there is an imbalance between the money supply and demand. In order to restore equilibrium, there are two possible adjustments that can occur depending on the exchange rate system in place. In a fixed exchange rate system, the balance of payments must adjust to restore equilibrium. In a flexible exchange rate system, the exchange rate value must adjust to restore equilibrium. Therefore, the correct answer is B, the balance of payments or the exchange rate value must adjust depending on the type of exchange rate system.

According to the Monetary Approach,when a Monetary Disequilibrium Exists,either ____________