If a country's money demand equals its money supply and its balance of payments is initially balanced, which of the following changes would cause the balance of payments to shift into a surplus?

Choose the correct answer

Explanation

A decrease in the money supply tends to raise interest rates, attracting foreign capital and improving the balance of payments, thereby creating a surplus. Conversely, increasing the money supply or lowering money demand would not have this effect.

If a country's money demand equals its money supply … — Exchange-Rate Determination | PakQuizHub