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Which of the following is not a source of demand for US dollars?

Select all that apply:

O foreigners seeking to make foreign direct investments in the US

O foreigners seeking to purchase stocks in US companies

O American firms seeking to import goods from Australia

O American tourists visiting France

User Geoff L
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1 Answer

6 votes

Final answer:

American firms importing goods from Australia and American tourists visiting France are not sources of demand for US dollars; they contribute to the supply of dollars on the foreign exchange market.

Step-by-step explanation:

The options that are not sources of demand for US dollars are:

  • American firms seeking to import goods from Australia
  • American tourists visiting France

These two options represent a supply of US dollars rather than demand because they involve US entities spending US dollars abroad, thus increasing the supply of dollars in the foreign exchange market. Conversely, demand for US dollars is generated by activities such as foreign investors looking to make direct investments in the US or purchasing stocks in US companies, both of which require them to convert their local currency into US dollars.

Therefore, American tourists visiting France is not a source of demand for US dollars. On the supply side of the foreign exchange market for the trading of US dollars are foreign firms that have sold imports in the US economy and are seeking to convert their earnings back to their home currency; US tourists abroad; and US investors seeking to make financial investments in foreign economies.

User Nathan Jhaveri
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