MKT-5.D—Explain (using graphs as appropriate) how exchange rates adjust to restore equilibrium in the foreign exchange market

Explain (using graphs as appropriate) how exchange rates adjust to restore equilibrium in the foreign exchange market.

• Disequilibrium exchange rates create surpluses and shortages in the foreign exchange market. Market forces drive exchange rates toward equilibrium.
• Enduring understanding MKT-5: The interaction of buyers and sellers exchanging the currency of one country for the currency of another determines the equilibrium exchange rate in a flexible exchange market and influences the flow of goods, services, and financial capital between countries.