The purchase of U.S. goods and services by foreigners
A) requires the purchase of dollar-denominated bonds.
B) increases the demand for U.S. dollars.
C) increases the demand for foreign currencies.
D) requires the purchase of U.S. financial assets as collateral.

Question

Quizplus · Accepted Answer

When foreigners purchase U.S. goods and services, they usually have to pay in U.S. dollars. Therefore, this increases the demand for U.S. dollars, as they must be obtained by the foreigners in order to make the purchase. This increase in demand for dollars can lead to an appreciation of the dollar's value.

The Purchase of U