Problem
1. What is meant by the term balance-of-payments adjustment? Why does a deficit nation have an incentive to undergo adjustment? What about a surplus nation?
2. Under a fixed exchange-rate system, what automatic adjustments promote payments equilibrium?
3. What is meant by the quantity theory of money? How did it relate to the classical price-adjustment mechanism?
4. How can adjustments in domestic interest rates help promote payments balance?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.