The foreign demand curve for a nation's currency is considered to be a derived demand because:
A)it stems from the willingness of consumers in one country to buy goods and services from another country.
B)it stems from the willingness of consumers within their country to buy goods and services that are produced within their country.
C)it is derived from the demand of governments.
D)it is derived by a nation's central bank.

Question

Quizplus · Accepted Answer

The foreign demand for a nation's currency is derived from the willingness of consumers in one country to buy goods and services from another country, which requires them to first acquire the currency of that country. Therefore, the demand for a currency is derived from the demand for the goods and services produced in the country that uses that currency.

The Foreign Demand Curve for a Nation's Currency Is Considered