Which of the following is not a reason why Joe Smith (an American) might participate as a demander in the foreign exchange market ?
Correct answer: B. his desire to purchase an automobile produced domestically
- A. his desire to open a bank account in Japan
- B. his desire to purchase an automobile produced domestically
- C. his desire to travel to Europe
- D. his desire to purchase Treasury bills issued by the British government
Explanation
Buying a domestically produced automobile normally requires domestic currency, so it does not create demand for foreign exchange. Opening a Japanese bank account, travelling to Europe, and buying British Treasury bills require foreign currency.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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