Problem
1. When a country has a floating exchange rate, the domestic money supply is not affected by shifts in its international payments. Is this statement true or false? Why?
2. Starting from an initial position of payments equilibrium, suppose that foreign demand for Country A's exports suddenly rises. If a flexible exchange rate exists, explain what would happen and how equilibrium would be restored.
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.