Question

how the equlibrium price of a forgein currency is determined . show with a diagram

Answer 1

Answer:

Graphically, intersection of demand and supply curves determines the equilibrium exchange rate of foreign currency. ... In this figure, demand curve is downward sloping which shows that less foreign exchange is demanded when exchange rate increases (i.e., inverse relationship).

These points are very important:

@ Demand for foreign exchange

@ Supply of foreign exchange

@ Determination of exchange rate

@ Change in exchange rate