A country has a floating exchange rate if the government lets the exchange rate go wherever the market may take it.

Question

Quizplus · Accepted Answer

A floating exchange rate means that the exchange rate is determined by the market forces of supply and demand, without the interference or influence of government or central banks. Therefore, if a country has a floating exchange rate, the government would not intervene to set a specific exchange rate or limit the fluctuation of the exchange rate.

A Country Has a Floating Exchange Rate If the Government