_____ refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.
A) Fixed exchange rate
B) Floating exchange rate
C) Flexible exchange rate
D) Pegged exchange rate
E) Nominal exchange rate

Question

Quizplus · Accepted Answer

A floating exchange rate refers to a system where the exchange rate is determined by market forces of supply and demand. The value of a currency is allowed to fluctuate depending on its demand in the global market. This arrangement contrasts with a fixed exchange rate where the value of a currency is set relative to another currency or a commodity. A flexible exchange rate is synonymous with a floating exchange rate, while a pegged exchange rate involves the government establishing a fixed value of its currency relative to a particular benchmark. A nominal exchange rate is the rate at which currencies are exchanged without considering inflation or other factors that influence the real exchange rate.

_____ Refers to a System Under Which the Exchange Rate