In a flexible exchange-rate system,the value of a currency is determined by
A)the government.
B)the intersection of the IS and LM curves.
C)the demand and supply for the currency in the foreign exchange market.
D)Swiss gnomes.

Question

Quizplus · Accepted Answer

In a flexible exchange-rate system, the value of a currency is determined by the demand and supply for the currency in the foreign exchange market. The government does not have direct control over the exchange rate, and the IS and LM curves are used to determine equilibrium levels of income and interest rates in a closed economy, not exchange rates. "Swiss gnomes" is not a valid factor in determining exchange rates.

In a Flexible Exchange-Rate System,the Value of a Currency Is