Where does the supply of dollars in the foreign-currency exchange market come from?
A) from Canadian national saving
B) from Canadian net capital outflow
C) from domestic investment
D) from foreign demand for Canadian goods

Question

Quizplus · Accepted Answer

The supply of dollars in the foreign-currency exchange market comes from Canadian net capital outflow, meaning the amount of Canadian investment abroad minus the amount of foreign investment in Canada. This is because when Canadians invest abroad, they need to purchase foreign currency (such as dollars) to make those investments, which increases the supply of foreign currency in the exchange market.

Where Does the Supply of Dollars in the Foreign-Currency Exchange