Final answer:
Americans buying goods from another country supply U.S. currency in the foreign exchange market to demand the currency of the country from which they are making purchases. The supply and demand of different currencies are influenced by trade, tourism, and investment activities.
Step-by-step explanation:
When Americans buy goods from another country, they are participating in the foreign exchange market. Specifically, they are supplying U.S. currency and demanding the foreign currency of the seller's country. This occurs because they need the foreign currency to pay for the imports. In the foreign exchange market, the supply and demand of currencies are driven by various factors, including international trade, tourism, and investment. For example, American tourists visiting China would supply U.S. dollars to demand Chinese yuan.
Conversely, when American exporters sell their goods abroad, they end up demanding U.S. currency when they convert their earnings back. Thus, the balance between the currencies' supply and demand dictates how much of one currency can buy another, ultimately determining the strength or appreciation, as well as the weakness or depreciation, of one currency relative to another.