Equilibrium in the foreign exchange market occurs:
A)at the point where the foreign exchange demand and supply curves intersect.
B)at the point where the foreign exchange demand and supply curves reach maximum separation.
C)when two nations' economic leaders agree on the appropriate exchange rate.
D)when two nations' diplomatic leaders agree on an exchange rate that meets both countries' needs.
E)only by chance,if at all,because they change very frequently.

Question

Quizplus · Accepted Answer

Equilibrium in the foreign exchange market occurs at the point where the foreign exchange demand and supply curves intersect. This is the point where the quantity of currency demanded equals the quantity of currency supplied, and there is no excess demand or excess supply in the market. The market mechanism works to adjust the exchange rate to reach this equilibrium point.

Equilibrium in the Foreign Exchange Market Occurs