The supply of U.S. dollars on foreign exchange markets is Answer 1. derived from the supply of U.S. goods. 2. derived from the demand by United States for imported goods and services. 3. determined directly by open market operations at the Federal Reserve Bank. 4. derived from the demand for U.S. products by foreigners.
The supply of U.S. dollars on foreign exchange markets is Answer 1. derived from the supply of U.S. goods. 2. derived from the demand by United States for imported goods and services. 3. determined directly by open market operations at the Federal Reserve Bank. 4. derived from the demand for U.S. products by foreigners.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![The supply of U.S. dollars on foreign exchange markets is
Answer
1. derived from the supply of U.S. goods.
2. derived from the demand by United States for imported goods and services.
3. determined directly by open market operations at the Federal Reserve Bank.
4. derived from the demand for U.S. products by foreigners.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1e0f3673-f252-4e95-8768-b17764645afa%2Faaf14d04-75df-497a-a6bb-39b0e2ad4524%2Fd6w90md_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The supply of U.S. dollars on foreign exchange markets is
Answer
1. derived from the supply of U.S. goods.
2. derived from the demand by United States for imported goods and services.
3. determined directly by open market operations at the Federal Reserve Bank.
4. derived from the demand for U.S. products by foreigners.
Expert Solution
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Step 1
The sell, exchange and buying of currencies takes place in foreign exchange markets. This market deals in current prices or pre determined prices.
Step 2
Country U dollars depends on the market demand, for e.g. if demand of good Y of Country U rises by the foreigners then for the accomplishment of desire, the dollars demand also increase which in turn leads to more supply of dollars in foreign exchange market.
Hence, option 4 is correct.
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