In a free-market-oriented foreign exchange market, major currency values are determined by the demand for and supply of currencies; this is called the fixed floating exchange rate system.

Question

Quizplus · Accepted Answer

In a free-market-oriented foreign exchange market, major currency values are not fixed and can fluctuate based on various economic factors such as inflation, interest rates, and political instability. This system is called a floating exchange rate system. In contrast, a fixed exchange rate system involves a government or central bank setting a specific value for a currency and maintaining it through various interventions in the foreign exchange market.

In a Free-Market-Oriented Foreign Exchange Market, Major Currency Values Are