If a country such as Europe sells their saved dollars as a result in a drop in U.S. sales and purchases, will the demand-supply graph show only the demand for the dollar. I just don't understand what the demand-supply graph suppose to illustrate. Help.

Europe is not a country. It's a continent. The European Union is made up of many independent countries that have agreed to use a joint currency -- the euro.

Draw a demand-supply graph for dollars. Put dollars (Q) in the x-axis, put Euros (P) on the y-axis. Demand for dollars is the willingness of people to purchase Dollars with with Euros. The supply of dollars is the willingness of people to sell their cache of dollars for Euros.

So What if, in your example, Europeans lose confidence in the Dollar and what it can purchase, and want to trade their Dollars for Euros. There will be in Increase in supply of dollars. Shift the supply curve outward. Price for dollars drops.

The demand-supply graph, also known as the supply and demand diagram, is a graphical representation of the relationship between the quantity of a good or service demanded by buyers and the quantity supplied by sellers at different prices. It illustrates the interaction between buyers (demand) and sellers (supply) in a particular market.

In the context of the question, if a country like Europe sells its saved dollars in large amounts due to a drop in U.S. sales and purchases, it will impact the demand for the U.S. dollar. Here's how you can understand it using the demand-supply graph:

1. Label the axes: The vertical axis represents price, while the horizontal axis represents quantity.
2. Draw the demand curve: The demand curve shows the quantity of U.S. dollars demanded by Europe at different prices. If European buyers are willing to buy fewer dollars due to reduced sales and purchases in the U.S., the demand curve will shift to the left, indicating a decrease in demand.
3. Draw the supply curve: The supply curve represents the quantity of U.S. dollars supplied to the market by Europe. If Europe is selling its saved dollars, the supply curve will shift to the right, indicating an increase in supply.
4. Analyze the new equilibrium: The point where the demand and supply curves intersect is the equilibrium point. As the demand for the U.S. dollar decreases and the supply increases, the equilibrium point will move towards a lower quantity and possibly a lower price.

By understanding and analyzing the demand-supply graph, you can visually see how changes in demand and supply affect the equilibrium price and quantity in a market. In this case, the graph would show a decrease in the demand for the U.S. dollar, while the supply may increase. However, the specific outcome would depend on the magnitude of these changes and other factors influencing the market.