Foreign households and foreign firms demand U.S. dollars in exchange for foreign

Question

Foreign households and foreign firms demand U.S. dollars in exchange for foreign currency for all of the following, except O A. when foreign firms and households want to invest in the United States either through foreign direct investment or through foreign portfolio investment. D B. when foreign firms and households want dollars so that they can buy goods and services produced in the United States C. when US. firms and households want foreign currencies so that they can buy goods and services produced in those foreign countries D D. when currency traders want dollars because they expect that the value of the dollar in the future to be greater than its current value. S households and U.S. firms supply U.S. dollars in exchange for foreign currency A. if the interest rate and other conditions in the foreign countries are lucrative for U S firms and households to invest dollars. B. when foreign fims and households want dollars so that they can buy goods and services produced in the United Stat C. ifu.S, currency speculators become convinced that the future value of the foreign currency will be lower relative to the dollar. D. when U. S. consumers and firms want to buy goods and services that are not produced in a foreign country

Explanation / Answer

1 c is correct answer

Foreigners want US dollar if they want to invest in US or if they want to buy some goods and services produced in US or some traders want to trade in order to have better returns in future.

2. A is correct option

When the home interest rate is less than the foreign interest rate then there is outflow of capital leading to supply of domestic currency in the foreign market.

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