The US Demand for Foreign Exchange Arises Because Its Citizens Want

question 55

Essay

The U.S. demand for foreign exchange arises because its citizens want to buy things whose prices are quoted in other currencies, such as Australian jewelry, vacations in Mexico, and bonds or stocks issued by Sony Corporation of Japan. Whenever U.S. citizens make these purchases, they first buy the foreign currencies and then make the purchases. If that is true then where does the supply of foreign exhange come from?

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Definitions:

Personal Costs

Expenses directly paid by an individual, often including living expenses, tuition, and personal bills.

Economic Activity

Every activity related to creating, distributing, and using products and services within an economic system.

Adam Smith

An 18th-century Scottish economist and philosopher, widely considered the father of modern economics, best known for his works on the principles of free market and the "invisible hand" concept.

Own Interests

Actions or decisions driven by personal benefits or gains, often discussed in the context of economic behavior or political decision-making.