Question

A U.S. bank wants to buy euros in order to buy German bonds. In the open-economy macroeconomic model, this transaction would be part of Group of answer choices the supply of currency in the foreign exchange market, and part of the supply of loanable funds. the demand for currency in the foreign exchange market, and part of the supply of loanable funds. the supply of currency in the foreign exchange market, and part of the demand for loanable funds. the demand for currency in the foreign exchange market, and part of the demand for loanable funds.

Answer 1

the demand for currency in the foreign exchange market, and part of the demand for loanable funds.

Step-by-step explanation:

The point where the demand and supply curves intersect determines the market exchange rate. An increase in the demand for a currency creates a rightward shift of the demand curve, ultimately causing a rise in the exchange rate and increasing the value of the currency demanded.

Exchange rates are determined by factors, such as interest rates, confidence, the current account on balance of payments, economic growth, and relative inflation rates.