Starting from a position where the nation's money demand equals the money supply and its balance of payments is in equilibrium,economic theory suggests that the nation's balance of payments would move into a surplus position if there occurred in the nation:
A) A decrease in the money supply
B) An increase in the money supply
C) A decrease in the money demand
D) None of the above

Question

Quizplus · Accepted Answer

A decrease in the money supply would lead to higher interest rates, attracting foreign capital and improving the balance of payments, potentially moving it into a surplus.

Starting from a Position Where the Nation's Money Demand Equals