Argonia Republic is in trade surplus with Kamboly. Under the gold stan

QUESTION

Argonia Republic is in trade surplus with Kamboly. Under the gold standard, which of the following statements is true until a balance-of-trade equilibrium is achieved?

A. There will be a net flow of gold from Argonia Republic to Kamboly.

B. The money supply in Kamboly will be reduced due to the flow of gold to Argonia Republic.

C. The prices of the traded goods in Kamboly will increase.

D. The demand for traded goods in Argonia Republic will increase.

E. Kamboly will start to buy more goods from Argonia Republic.

ANSWER

B