"According to the monetary approach,a balance-of-payments disequilibrium is the result of an imbalance in a country's money supply and money demand."

Question

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The monetary approach to balance of payments emphasizes that a country's balance of payments position depends on the supply and demand for money in the economy. If the money supply exceeds money demand, it leads to higher aggregate demand and a tendency to import more than export, leading to a balance-of-payments deficit. Similarly, if money demand exceeds money supply, the economy tends to export more than import, resulting in a balance-of-payments surplus. Therefore, a balance-of-payments disequilibrium is the result of an imbalance between money supply and demand.

"According to the Monetary Approach,a Balance-Of-Payments Disequilibrium Is the Result