True or False?
The statement is false. Both countries' residents still want to hold the same amount of gold the next day. Thus, A-residents will sell non-monetary assets to B-residents so everyone can regain portfolio equilibrium. Gold will move back from B to A in return for ownership claims for capital. B-residents are now richer and A-residents poorer, so Country A's exports to Country B will increase and Country B's exports to Country A to will fall. At the same time, Country A's debt service balance will be smaller because A-residents now hold less of the world stock of non-monetary assets. The real exchange rate---that is, the price level in A relative to the price level in B---may be affected in either direction as world goods market equilibrium is re-established, depending on the structures of the two economies.