Any force that shifts either the demand for or supply of a currency will shift the equilibrium in the foreign exchange market,leading to a new exchange rate.

Question

Quizplus · Accepted Answer

Any factor that affects the demand for or supply of a currency, such as changes in interest rates, inflation rates, political stability, or changes in government policies, can shift the equilibrium in the foreign exchange market, ultimately resulting in a new exchange rate.

Any Force That Shifts Either the Demand for or Supply