6. Given a currency pair, what happens to the exchange rate if the foreign exchange market is in disequilibrium? Does it matter if the exchange rate is above or below the equilibrium rate? Understand what market forces that would drive the exchange rate back to equilibrium. Hint Think of supply and demand. 7. What are the current account and capital account? What is the balance of payments, what does it indicate, and why is it useful for the manager of an MNC? How does a country's relative inflation rate affect its current account balance? How does a country's relative interest rate affect its current account balance? Hint th e flame and time offerte change rates. We dicenced the