Under a fixed exchange system with a flexible price level,balance of payments equilibrium will occur

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Under a fixed exchange system with a flexible price level, the exchange rate is fixed, but the domestic price level can adjust to maintain balance of payments equilibrium. Eventually, as prices adjust, the economy will reach balance of payments equilibrium automatically in the long-run without the need for any policy intervention such as devaluation or revaluation, or an activist monetary policy.

Under a Fixed Exchange System with a Flexible Price Level,balance