How would you modify your explanation

Reference no: EM131917698

Problem

Suppose that there is an increase in national income in a country. Under a fixed exchange rate system, according to the monetary approach, will the country's balance of payments (official reserve transactions balance) move toward surplus or toward deficit? Why? How would you modify your explanation (though not your conclusion) if you were using the portfolio balance approach in a fixed exchange rate context?

Reference no: EM131917698

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