Q: a) Select from price level; nominal interest rate to fill in the following blanks

a).  In the short-run asset approach, the nominal interest rate adjusts to bring the money market to equilibrium. In the long-run monetary approach, the price level adjusts to bring the money market to equilibrium.

Nominal interest rate is completely flexible in the period of short run, thus it varies accordingly to make the money market to a state of equilibrium.

Price level is completely flexible in the period of long run, thus it varies accordingly to make the money market to a state of equilibrium.

b). The balance of payments (BOP) records the transactions in goods, service and other assets among the residents of a country with the rest of the world.

• It is a systematic record of all the economic transactions between the residents of a nation and the rest of the world in a given period of time usually ine year.
• It includes the value of goods exported and imported that is visible items and invisible items and capital transactions.

The economic terms in BOP are :

• Visible items : All types of physical goods imported and exported.
• Invisible items : services exported and imported.
• Capital transfers : items consisting of capital receipts and capital payments which involves transfer of assets and liabilities.