Question

The demand for dollars in the foreign exchange market

1. is fixed by the US government.
2. is related, at least in part, on the demand for US goods by foreigners.
3. does not fluctuate year to year.
4. is related to the US demand for imports.

Answer 1

The law of demand holds: as the price of a foreign currency increases, the quantity of that currency demanded will decrease. Foreign currencies are supplied by foreign households, firms, and governments that wish to purchase goods, services, or financial assets denominated in the domestic currency