In the open-economy macroeconomic model, what does the quantity of dollars demanded in the foreign-currency exchange market depend on?
A) the real exchange rate and import quotas
B) the real exchange rate and government deficit
C) the real interest rate and import quotas
D) the real interest rate and government deficit

Question

Quizplus · Accepted Answer

The quantity of dollars demanded in the foreign-currency exchange market depends on the real exchange rate and import quotas. The real exchange rate affects how much foreign goods cost in terms of domestic goods, influencing the demand for foreign currency to purchase imports. Import quotas, by limiting the quantity of foreign goods, can also affect the demand for foreign currency.

In the Open-Economy Macroeconomic Model, What Does the Quantity of Dollars