Question

How is equilibrium exchange rate determined in a capitalist economy ??????​

Answer 1

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★ Graphically, intersection of demand and supply curves determines the equilibrium exchange rate of foreign currency.

★ The reason is that rise in the price of foreign exchange (dollar) increases the rupee cost of foreign goods which makes them more expensive. The result is fall in imports and demand for foreign exchange.

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Answer 2

Answer:

★ Graphically, intersection of demand and supply curves determines the equilibrium exchange rate of foreign currency.

★ The reason is that rise in the price of foreign exchange (dollar) increases the rupee cost of foreign goods which makes them more expensive. The result is fall in imports and demand for foreign exchange.