According to the Price-specie-flow mechanism, a balance of payments deficit leads to
Under the classical gold standard, an external deficit causes gold outflow and contracts the domestic money supply. With no sterilisation, this puts downward pressure on…
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According to the Price-specie-flow mechanism, a balance of payments deficit leads to
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Correct answer C
Under the classical gold standard, an external deficit causes gold outflow and contracts the domestic money supply. With no sterilisation, this puts downward pressure on domestic prices.
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