Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?
A) An oil company in Nigeria wants to buy oil rigging equipment from a Canadian manufacturer.
B) A Canadian bank loans dollars to Makena, a Canadian resident, who wants to purchase a new car made in Canada.
C) A Canadian-based mutual fund wants to purchase shares issued by a Polish company.
D) A Canadian resident imports a car made in Sweden.

Question

Quizplus · Accepted Answer

DIn the market for foreign-currency exchange, the supply of dollars is determined by those wanting to exchange dollars for foreign currency. This includes C) A Canadian-based mutual fund wanting to purchase shares issued by a Polish company, as they would need to convert their dollars into Polish currency to make the purchase. Similarly, D) A Canadian resident importing a car made in Sweden would need to exchange dollars for the foreign currency to pay for the car, thus supplying dollars to the market. Choices A and B do not involve exchanging dollars for foreign currency; hence, they do not contribute to the supply of dollars in the foreign exchange market.

Which of the Following Is Included in the Supply of Dollars