Question

The amount of U.S dollar demanded in currency markets at a given exchange rate increases if. A.) the U.S demand for imports is unchanged. B.)demand for U.S exports decrease C.) demand for U.S. imports increase D.) demand . for U.S. exports is unchanged. E.) none of the above

Answer 1

The amount of US dollar demanded in currency markets at a given exchange rate increases if the demand for the US export increases. ( here the answer is E ) None of the above ) . This is because , US Dollar acts as the primary medium of exchange worldwide. This being the case, when the exports from the US side increases, the country to which is importing these exports needs money to buy the imported product. For buying this imported product, it needs more Dollar ( which acts as the medium of exchange ) . Therefore, when this export of goods from US or in that case from any other country to other countries increases worldwide, the demand for the US Dollar increases to buy off the imported goods.