The flexible exchange rate system uses supply and demand to determine the exchange rate.

Question

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In a flexible exchange rate system, the exchange rate is determined by the forces of supply and demand in the foreign exchange market. The exchange rate fluctuates freely and is not fixed to any specific currency or commodity. This is in contrast to a fixed exchange rate system, where the exchange rate is set by the government or central bank and is not responsive to market forces.

The Flexible Exchange Rate System Uses Supply and Demand to Determine