Question

Very Short Answer Type Questions:
How is equilibrium exchange rate determined in the foreign exchange market?

Answer 1

The equilibrium exchange rate determined in the foreign exchange market is determined by the flexible rate of exchange.Flexible rate of exchange is the rate which is determined by the supply-demand forces in the foreign exchange market. It is also called 'free exchange rate' as it is determined by the free play of supply and demand forces in the international currency market.