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) An increase in the money demand
B) A decrease in the money demand
C) An increase in the money supply
D) None of the above

Question

Quizplus · Accepted Answer

An increase in money demand, with a constant money supply, would lead to higher interest rates, attracting foreign capital and improving the balance of payments, potentially leading to a surplus.

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