When supply and demand analysis is used to study the exchange rate, how is foreign exchange treated?

Question

Quizplus · Accepted Answer

In supply and demand analysis, foreign exchange is treated the same as a good or a service. The exchange rate represents the price at which two currencies are exchanged, and the supply and demand for each currency in the foreign exchange market determine the exchange rate. Therefore, foreign exchange is treated as a product that is traded in a market.

When Supply and Demand Analysis Is Used to Study the Exchange