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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