Which group would demand dollars in the foreign exchange market? I. Americans who want to buy U.S. goods, services, and assets
II) Americans who want to buy European goods, services, and assets
III) Europeans who want to buy U.S. goods, services, and assets

Question

Quizplus · Accepted Answer

III only. Americans buying U.S. goods, services, and assets would use dollars directly and not demand them in the foreign exchange market. Americans wanting to buy European goods, services, and assets would supply dollars to exchange for euros or other currencies. Europeans wanting to buy U.S. goods, services, and assets would demand dollars in the foreign exchange market to complete their purchases.

Which Group Would Demand Dollars in the Foreign Exchange Market