The quantity of U.S.dollars demanded in foreign exchange markets is primarily a function of ________.

Question

Quizplus · Accepted Answer

The expected return on U.S. dollar assets relative to foreign assets is a key factor influencing the demand for U.S. dollars in foreign exchange markets. If the expected return on U.S. dollar assets is relatively high compared to foreign assets, then demand for U.S. dollars will increase, leading to an increase in the foreign exchange value of the dollar. Conversely, if the expected return on U.S. dollar assets is relatively low compared to foreign assets, then demand for U.S. dollars will decrease, leading to a decrease in the foreign exchange value of the dollar. The other options may have some impact on the demand for U.S. dollars but are not the primary drivers of demand in foreign exchange markets.

The Quantity of U