When the value of a currency is determined ________, the exchange rate system is defined as a 'floating exchange rate system'.
A)only by supply and demand
B)by the country's government
C)mostly by supply and demand, but with occasional government intervention
D)by the country's government, with occasional readjustments in value

Question

Quizplus · Accepted Answer

In a floating exchange rate system, the value of a currency is determined mostly by supply and demand in the foreign exchange market, without much intervention from the government. This allows the exchange rate to fluctuate freely based on market forces, such as changes in interest rates, inflation, economic growth, and geopolitical events. The government may occasionally intervene to stabilize the exchange rate, but it does not set a fixed rate or target a certain value for the currency. Therefore, choice A is the most accurate description of a floating exchange rate system.

When the Value of a Currency Is Determined ________, the Exchange