The monetary approach contends that,under a fixed exchange rate system,policies that increase the supply of money relative to the demand for money lead to a trade surplus.

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The monetary approach contends that under a fixed exchange rate system, policies that increase the supply of money relative to the demand for money lead to an excess demand for foreign currency, causing the currency to depreciate and potentially leading to a trade deficit.

The Monetary Approach Contends That,under a Fixed Exchange Rate System,policies