The quantity of U.S.dollars demanded in foreign exchange markets is related negatively to ________.

Question

Quizplus · Accepted Answer

The current exchange rate and the quantity of U.S. dollars demanded are inversely related, meaning that as the exchange rate increases (i.e. the value of the dollar rises), the quantity demanded of dollars in foreign exchange markets decreases. This is because a higher exchange rate means that foreign currency can be purchased with fewer dollars, making it relatively more expensive to buy U.S. goods and services and thus reducing the demand for dollars. The other options (B, C, and D) are not directly related to the quantity of dollars demanded in foreign exchange markets.

The Quantity of U