Net worth column of Table 5

We find that Japanese imports create a domestic demand for foreign monies (dollars, in this case)

And that the fulfilment of this demand reduces the supplies of foreign monies held by Japanese banks.

Moreover, Japanese import transactions increase the supply of money in America and reduce the

Supply of money in Japan.

Japanese exports (in this case, cars) make available, or “earn,” a supply of foreign monies for

Japanese banks, and Japanese imports (American semiconductors, in this instance) create a demand

for these monies. That is, in a broad sense, any nation’s exports finance or “pay for” its imports.

Exports provide the foreign currencies needed to pay for imports. We note that American

Exports of semiconductors earn a supply of yen, which are then used to meet the demand for yen

Associated with American imports of Japanese cars.

Postscript: Although our examples are confined to the exporting and importing of goods, we

Shall get convinced momentarily that demands for and supplies of dollars, yen, pounds and other

Freely convertible currency also arise from transactions involving services and the payment of interest

And dividends on foreign investments.

Terminological Vocabulary to Text 8.4. Try to memorize it