Which of the following is a reason that might lead foreigners to demand more dollars? A) An increase in foreign wealth B) A decrease in the real yield on U.S. bonds C) A preference... Which of the following is a reason that might lead foreigners to demand more dollars? A) An increase in foreign wealth B) A decrease in the real yield on U.S. bonds C) A preference for foreign-made goods D) An expected appreciation of the dollar
Understand the Problem
The question is asking us to identify a reason why foreigners might want to acquire more dollars based on various economic scenarios presented in the options. We will analyze each option to determine which one logically leads to an increased demand for dollars.
Answer
An expected appreciation of the dollar.
The final answer is An expected appreciation of the dollar.
Answer for screen readers
The final answer is An expected appreciation of the dollar.
More Information
The expectation that the dollar will appreciate makes U.S. investments more attractive to foreigners, as it implies a higher return on investments when converted back to their local currency.
Tips
A common mistake is assuming that foreign preference for their own goods decreases the demand for dollars, but importers still need dollars to pay for U.S. goods.
Sources
- BSAD 183 answer keys 2nd half.docx - uvm.edu
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