If a country starts at a point where its money demand matches the money supply and its balance of payments is balanced, economic theory predicts that the country’s balance of payments will shift to a surplus if there is a(n):

Choose the correct answer

Explanation

An increase in the demand for money leads to a higher demand for domestic currency, which can improve the balance of payments and result in a surplus. Conversely, a decrease in money demand would not produce this effect.

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