Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S. foreign-currency exchange market.

Question

Quizplus · Accepted Answer

When a Canadian company imports bicycles from the U.S., it needs to exchange Canadian dollars for U.S. dollars to pay for the transaction. This increases the demand for dollars in the foreign-currency exchange market, which is treated as an increase in the quantity of dollars demanded.

Other Things the Same, When a Canadian Company Imports Bicycles