In the open-economy macroeconomic model,the quantity of dollars demanded in the market for foreign-currency exchange
A)depends on the real exchange rate.The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
B)depends on the real interest rate.The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate.
C)and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate.
D)and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.

Question

Quizplus · Accepted Answer

The quantity of dollars demanded in the foreign-currency exchange market depends on the real exchange rate because it affects the relative price of domestic and foreign goods. The quantity of dollars supplied depends on the real interest rate, as it influences capital flows and investment decisions.

In the Open-Economy Macroeconomic Model,the Quantity of Dollars Demanded in the Market