2. Introduction to the foreign-currency exchange market Why does the demand curve for dollars in the...

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2. Introduction to the foreign-currency exchange market Why does the demand curve for dollars in the foreign-currency exchange market slope downward in an open economy? O When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers. O Net capital outflow equals net exports. O A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall. O A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange. 2. Introduction to the foreign-currency exchange market Why does the demand curve for dollars in the foreign-currency exchange market slope downward in an open economy? O When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers. O Net capital outflow equals net exports. O A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall. O A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange.

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