Question: a. Please explain how the equilibrium is reached in the foreign exchange market as illustrated in the figure, based on the theories discussed. Exchange rate,

a. Please explain how the equilibrium is reached in the foreign exchange market as illustrated in the figure, based on the theories discussed.

a. Please explain how the equilibrium is reached in the foreign

Exchange rate, ESIE Return on dollar deposits 2 ESIE Esie 3 Esie Expected return on euro deposits Ris Rates of return (in dollar terms)

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