In a floating exchange rate system, the dollar per pound exchange rate is determined by:

Question

Quizplus · Accepted Answer

In a floating exchange rate system, the exchange rate is determined by the interaction of demand and supply of currencies in the foreign exchange market. The exchange rate between the dollar and pound will be determined by the demand for and supply of dollars and pounds in the market. The American and British governments do not have direct control over the exchange rate in a floating exchange rate system, although they may indirectly influence it through economic policies. The stock market only indirectly affects the exchange rate through its impact on the demand for dollar-denominated assets.

In a Floating Exchange Rate System, the Dollar Per Pound