Question

Question Completion Status: QUESTIONS How does the balance of payments stay in balance? The foreign exchange market stays in equilibrium All of these choices Whatever goes out of a country should come back in Trade must be paid for somehow Relative prices or debt will change to eliminate imbalances QUESTION 3 Holding other things constant, an increase in aggregate capital stock shifts the aggregate labor demand curve to the and the equilibrium real wage in the labor market. (NB: stock here means the level or amount of capital employed, not the financial instrument) right; lowers right; raises left; lowers left; raises

Answer 1

2]

Balance of payments must always balance because the balance of payments is like a ledger account which records transactions with a double-entry method. Hence, every transaction is recorded as a debit and a credit with equal amounts. Therefore, the account is always balanced from an accounting perspective.  

The third option is correct - whatever goes out must come back in, according to the double entry system of accounting. Thus, any shortfall is borrowed from somewhere, and any excess is invested somewhere.

The first option is incorrect - the foreign exchange market staying in equilibrium is not the reason for balance of payments to stay in balance

The fourth option is incorrect - this affects balance of trade, not balance of payments

The fifth option is incorrect - imbalances are not eliminated by changes in relative prices or debt