Under a flexible exchange rate system,the equilibrium price of one currency in terms of another is
A) unaffected by international differences in relative price levels.
B) equal to the ratio of the amount of gold in a unit of each currency.
C) regularly adjusted by the International Monetary Fund within a fixed range.
D) determined by supply and demand.
E) more likely to appreciate than depreciate.

Question

Quizplus · Accepted Answer

Under a flexible exchange rate system, the equilibrium price of one currency in terms of another is determined by supply and demand in the foreign exchange market. The exchange rate will adjust to balance the demand for and supply of each currency which determines the prevailing exchange rate.

Under a Flexible Exchange Rate System,the Equilibrium Price of One