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7 August, 03:47

Suppose demand for U. S. products across the world increases. What is the impact on the flow of financial capital as a result of the increase in demand for products, the value of the U. S. dollar, and the foreign money price of the U. S. dollar? Financial capital flow / Value of the U. S. dollar / Price of the U. S. dollar No Change / Appreciate / Increase Inflow / Depreciate / Decrease Inflow / Appreciate / Increase Outflow / Depreciate / Increase Outflow / Appreciate / Decrease

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  1. 7 August, 03:52
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    Impact on the flow of financial capital:

    Financial capital flow / Value of the U. S. dollar / Price of the U. S. dollar:

    No Change / Appreciate / Increase

    Financial capital flow will not change. Financial capital flow does not refer to the flows for purchase of goods and services, but only for investments.

    The value of U. S. dollar will appreciate relative to the increased demand.

    The price of the U. S. dollar will increase, given the law of supply and demand.

    Explanation:

    a) Financial Capital Flow refers to the movement of investment capital, in and out of countries. When money for investment goes from one country to another, it is a capital flow, in-flow for the country receiving and out-flow for the country investing. The term does not include money people and businesses use to purchase each others' goods and services. There is why, in this scenario, there is no recorded change in financial capital flow in the U. S.

    b) The value of the U. S. dollar is the total amount of U. S. dollar which a foreign currency can purchase at a particular exchange rate. It is based on the exchange rate, otherwise called the price of the U. S. dollar to another currency.

    c) Price of the U. S. dollar is the exchange rate. It shows the value of one U. S. dollar vis-a-vis a foreign currency.
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