A system where the exchange rate is determined primarily by market forces is called

Question

Quizplus · Accepted Answer

A floating exchange rate system is determined by market forces such as supply and demand. It means that the exchange rate is allowed to fluctuate based on the market without any interference from the government or central bank. In a fixed exchange rate system, the exchange rate is set by the government or central bank, and in dollarization, a country adopts a foreign currency as its own. A dirty float is a floating exchange rate system, but with occasional government intervention to influence the exchange rate.

A System Where the Exchange Rate Is Determined Primarily by Market