In the foreign exchange market,the quantity U.S.dollars demanded is a function of:

Question

Quizplus · Accepted Answer

The quantity of U.S. dollars demanded in the foreign exchange market depends on the amount of exports, as exports require foreign countries to purchase U.S. dollars to pay for the goods and services they are importing. Additionally, the level of capital inflows (foreign investment into the U.S.) affects the demand for U.S. dollars, as investors need to purchase dollars in order to invest in U.S. assets. Therefore, choice C, which includes both exports and capital inflows as factors affecting the quantity of U.S. dollars demanded, is the correct answer.

In the Foreign Exchange Market,the Quantity U