Question

The demand for U.S. dollars​ represents:

A. the demand for foreign goods and financial assets by households and firms within the United States.
B. the demand for U.S. goods and financial assets by households and firms outside the United States.
C. the demand for U.S. goods and financial assets by households and firms within the United States.
D. the willingness of households and firms that own dollars to exchange them for foreign currency.

Answer 1

The correct answer is option B.

Step-by-step explanation:

The demand for a currency implies that the currency is being demanded by foreign households and firms. In the case of US dollars, it represents the demand for US goods and financial assets by households and firms outside the United States.

Similarly, the demand for foreign currency by US residents represents the demand for foreign goods and financial assets by households and firms within the United States.