An increase in wealth in the U.S. will lead to the following in the foreign exchange market:
A) a decrease in the demand for dollars.
B) a decrease in the supply of dollars.
C) an increase in the supply of dollars.
D) an increase in the demand for dollars.

Question

Quizplus · Accepted Answer

An increase in wealth in the U.S. typically leads to an increase in imports as consumers and businesses are able to spend more on foreign goods and services. This results in more dollars being offered in exchange for foreign currencies to facilitate these purchases, thereby increasing the supply of dollars in the foreign exchange market.

An Increase in Wealth in the U