Question

when foreign countries buy wheat grown in the u.s., they are generating a: group of answer choices demand for u.s. dollars and a demand for foreign currency. demand for u.s. dollars and a supply of foreign currency. supply of u.s. dollars and a demand for foreign currency. supply of u.s. dollars and a supply of foreign currency.

Answer 1

Foreign countries buying U.S. wheat create a demand for U.S. dollars and supply foreign currency in the exchange market.

Step-by-step explanation:

When foreign countries purchase wheat grown in the U.S., they are generating a demand for U.S. dollars and a supply of foreign currency. This is because foreign buyers need to exchange their currency for U.S. dollars in order to pay American farmers. Therefore, they supply their own currency to the foreign exchange market and demand U.S. dollars. On the other side, the supply of U.S. dollars in the foreign exchange market can increase when U.S. firms or investors use the dollars to buy foreign products, invest in foreign countries, or when U.S. tourists spend abroad. Currency exchange rates fluctuate based on these demands and supplies, as well as expectations and differences in interest rates between countries.