The real value of the U.S. dollar is determined by the
U.S. government
value of goods and services it buys***
U.S. investors in the foreign market
foreign investors in the foreign exchange market
supply and demand in the open market
I don't know if my answer is correct (they all seem relatively correct to me)… please help?
I agree.
https://www.thebalance.com/value-of-money-3306108
To determine the real value of the U.S. dollar, you would consider several factors. While all the options you mentioned can influence the value to some extent, the primary determinant is the supply and demand in the open market.
When it comes to supply and demand, the value of the U.S. dollar fluctuates based on how much of it is available in circulation and how much investors and individuals are willing to buy it. If there is a high demand for the U.S. dollar, its value increases, making it more expensive to buy goods and services from other countries. Conversely, if there is less demand for the U.S. dollar, its value decreases, making foreign goods and services relatively cheaper.
While the U.S. government does have some influence through monetary policy and regulations, they primarily attempt to maintain economic stability rather than directly determine the value of the currency. Similarly, the value of goods and services the government buys or U.S. investors in the foreign market can affect currency exchange rates, but they are secondary factors compared to the overall supply and demand dynamics.
Foreign investors in the foreign exchange market can impact the value of the U.S. dollar as well. When they buy or sell large amounts of U.S. currency, it can affect its value in the global market. However, their actions are still part of the overall supply and demand forces in the open market.
Therefore, while all the options you mentioned have some influence, the primary determinant of the real value of the U.S. dollar is the supply and demand in the open market.