One difference between foreign and domestic demand for a commodity exported by the United States is that
A) foreign demand is unrelated to the dollar price of the commodity.
B) foreign demand depends on the exchange rate between domestic and foreign currencies.
C) the domestic price elasticity of demand depends on the availability of substitute commodities.
D) foreign-made commodities are not good substitutes for U.S.-made commodities.

Question

Quizplus · Accepted Answer

Foreign demand for a commodity exported by the United States is influenced by the exchange rate between the domestic currency (U.S. dollar) and foreign currencies. When the dollar strengthens, U.S. exports become more expensive for foreign buyers, potentially reducing foreign demand. Conversely, when the dollar weakens, U.S. exports become cheaper for foreign buyers, potentially increasing foreign demand.

One Difference Between Foreign and Domestic Demand for a Commodity