The difference between a fixed and a floating exchange rate regime is that with a _____ rate system, the _____, whereas with a _____ rate system it does not.

Question

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In a floating exchange rate system, the central bank retains more autonomy over its monetary policy because the exchange rate is determined by the market without direct intervention. In contrast, a fixed exchange rate regime requires the central bank to intervene in the currency market to maintain the pegged rate, which can limit its ability to use monetary policy independently.

The Difference Between a Fixed and a Floating Exchange Rate