Categories

Provide an example of the imports effect on the supply of U.S. dollars.

Category : International Economics | Answer: 1 2 Years Ago

Follow (0)

Views (112)

Share

Share

Share

Share

The imports effect is the result that the larger the value of U.S. imports, the larger the quantity of dollars supplied for purchasing those imports from foreign firms. When the exchange rate for U.S. dollars rises foreign imports become cheaper relative to U.S. produced goods and services so the volume of U.S. imports increases, which increases the supply of U.S. dollars to exchange for foreign currency to finance the purchase of the imports. So if the exchange rate rises (and other influences remain the same), the quantity of U.S. dollars supplied in the foreign exchange market increases. This change increases demand for foreign imports, which increases the supply of U.S. dollars to exchange for foreign currency to finance the purchase of imports, all else held constant.

2 Years Ago
(0)
Reply