The exchange rate of a currency will increase if the quantity demanded exceeds quantity supplied at the current exchange rate.

Question

Quizplus · Accepted Answer

If there is more demand for a currency than there is supply, the value of the currency will increase because people are willing to pay more to acquire it. This increases the exchange rate of the currency. On the other hand, if there is an oversupply of the currency such that there are more units of currency than there are people willing to buy them, the value of the currency will decrease, leading to a decrease in the exchange rate. Therefore, the quantity demanded and supplied of a currency affects its exchange rate.

The Exchange Rate of a Currency Will Increase If the Quantity