The exchange rate is determined by the interaction of the supply and demand for currencies in which exchange rate system is:

Question

Quizplus · Accepted Answer

In a fixed exchange rate system, the central bank intervenes in the currency market to maintain a fixed rate, regardless of supply and demand. In a flexible exchange rate system, the exchange rate is determined by market forces of supply and demand, making B the correct answer. "All of the above" and "none of the above" are incorrect answers as they provide either too broad or too narrow a scope.

The Exchange Rate Is Determined by the Interaction of the Supply