In year 1, countries X and Y are both in balance of payments equilibrium. During year 2, country X, which exports oil, increases the price of its oil, so its foreign earnings rise by $500m, and half of this amount is deposited in banks in country Y. Country Y is a major purchaser of X’s oil, and the higher price causes its foreign expenditure to rise by $400m. If all other factors stay the same, what are the total currency flows for X and Y?
- AX +150 ($m); Y –150 ($m)
- BX +150 ($m); Y –400 ($m)
- CX +250 ($m); Y –150 ($m)
- DX +250 ($m); Y –400 ($m)