A country that allows its exchange rate to be determined by the market, without government intervention, has a:
A)floating currency.
B)fixed currency.
C)managed float exchange rate system.
D)gold standard.

Question

Quizplus · Accepted Answer

A country that allows the market forces of supply and demand to determine the value of its currency has a floating currency. In this system, the value of the currency can fluctuate depending on various factors such as trade deficits, inflation, interest rates, and geopolitical events. This approach contrasts with a fixed currency system where the government pegs the value of the currency to a specific rate or another currency. A managed float exchange rate system involves some government intervention to influence the value of the currency without fixing it to a specific rate. The gold standard refers to a monetary system where the value of a currency is tied to a specific amount of gold.

A Country That Allows Its Exchange Rate to Be Determined