In the foreign exchange market, which of the following increases the quantity of dollars demanded?
I. Firms expect a larger profit from holding dollars.
II. Mexicans' income rise so that they buy more U.S. made goods.

Question

Quizplus · Accepted Answer

Both I and II increase the quantity of dollars demanded. I increases demand because firms expect higher returns from holding dollars, and II increases demand because higher Mexican income leads to more purchases of U.S. goods, requiring more dollars.

In the Foreign Exchange Market, Which of the Following Increases