Question

In the foreign exchange market, the demand curve for U.S. dollar is vertical. True or False

In the foreign exchange market, the demand curve for U.S. dollar is vertical. True or False

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer: False.
Explanation: The demand curve for US dollar slopes downward in the foreign exchange market. This is the law of demand for foreign exchange. This shows
When the dollar appreciates, this leads to US good becoming more dear and expensive to foreigners. So what they do they purchase less of the goods and hence the quantity demanded of dollars decreases.
When US currency increases in value, its quantity decreases.
Likewise, when the US dollar depreciates, the US products (exports) become cheap to foreigners. Hence they engage in buying more of US goods. This leads to increase in quantity demand of US dollars.
Hence, the demand curve for US dollar is not vertical, rather downward sloping.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When demand for Canada’s exports falls: a. supply of the Canadian dollar in the foreign exchange...
When demand for Canada’s exports falls: a. supply of the Canadian dollar in the foreign exchange market rises. b. the U.S. federal government will always respond by increasing U.S. tax rates. c. the U.S. federal government will always respond by increasing U.S. exports. d. Canadian producers will sell more goods to foreigners. e. demand of the Canadian dollar in the foreign exchange market falls.
2. Using a figure describing both the U.S. money market and the foreign exchange market, analyze...
2. Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rate. 3. What are the main factors that determine aggregate money demand? Why does the real money demand curve slope downward? 4. What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.10 per euro, next year's expected exchange rate is $1.165 per euro,...
In recent years the U.S. dollar has weakened against the Euro in the foreign exchange market....
In recent years the U.S. dollar has weakened against the Euro in the foreign exchange market. a) Explain how this effects trade between the two countries. b) Explain how such a situation can have a positive effect on the U.S. economy.
Consider the exchange rate between the U.S. and Japan. Draw a demand curve for dollars and...
Consider the exchange rate between the U.S. and Japan. Draw a demand curve for dollars and a supply curve for dollars. Label the vertical axis “Japanese Yens per dollar” and the horizontal axis  ”quantity of dollars.” Show the equilibrium U.S.-Japanese exchange rate. Holding other factors constant, explain and illustrate on the graph the impact of each of the following events on the value of dollar (expressed in Japanese Yen): a- The Federal Reserve increases U.S. interest rates b- Japan goes into...
If the supply curve is vertical, then supply is perfectly inelastic. A) True B) False If...
If the supply curve is vertical, then supply is perfectly inelastic. A) True B) False If a $5 decrease in the price of a good leads to a ten unit increase in quantity demanded, then demand must be elastic. A) True B) False If the absolute value of the price elasticity of demand for peanuts is 2, then a 10 percent increase in the price of peanuts will lead to a 5 percent decrease in the quantity of peanuts demanded....
The demand for euros on the foreign exchange market is a derived demand. Explain this statement.
The demand for euros on the foreign exchange market is a derived demand. Explain this statement.
When the exchange rate falls for Dollars, in the foreign exchange market the    A) quantity...
When the exchange rate falls for Dollars, in the foreign exchange market the    A) quantity demanded of the dollar increases.     B) demand for the $ currency increases. C) quantity demanded of the $ decreases.            D) demand for the $ decreases
The Federal Reserve wishes to strengthen the dollar in the foreign exchange market and to sterilize...
The Federal Reserve wishes to strengthen the dollar in the foreign exchange market and to sterilize the operation in the domestic money market. What should they do?
What happens in the foreign exchange market if the U.S. interest rate increases? What is the...
What happens in the foreign exchange market if the U.S. interest rate increases? What is the effect on the exchange rate?
The exchange rate between the U.S. dollar and other currencies is dependent in the short run...
The exchange rate between the U.S. dollar and other currencies is dependent in the short run on all of the following EXCEPT A. the desirability of U.S. financial securities. B. the law of one price. C. the foreign demand for​ U.S.-produced goods. D. the level of interest rates in the United States relative to foreign interest rates.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT