Under the price-adjustment mechanism,a government's efforts to maintain a current-account surplus is self defeating over the long run because a nation's current account automatically moves toward equilibrium.

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The price-adjustment mechanism refers to how changes in exchange rates can affect a country's current account balance. When a government tries to maintain a current-account surplus by manipulating exchange rates, it can lead to a situation where the country's currency becomes overvalued and exports become less competitive, while imports become cheaper. This can lead to a trade deficit and a reduction in the current-account surplus over time, as the automatic mechanisms of supply and demand in the foreign exchange market work to bring exchange rates and trade balances back into equilibrium. Therefore, a government's efforts to maintain a current-account surplus through exchange rate manipulation are ultimately self-defeating.

Under the Price-Adjustment Mechanism,a Government's Efforts to Maintain a Current-Account