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      Question

      Starting from a position where the nation's money demand

      equals the money supply and its balance of payments is in equilibrium. Its balance of payments would move into a surplus position if there occurred in the nation a (an)?
      A decrease in the money supply Correct Answer Incorrect Answer
      B increase in the money supply Correct Answer Incorrect Answer
      C decrease in the money demand Correct Answer Incorrect Answer
      D None of the above Correct Answer Incorrect Answer

      Solution

      The balance of payments moves into a surplus position when there is a decrease in the money supply, because it raises interest rates and attracts foreign capital inflows.

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