Under a floating exchange rate,the exchange rate
A)will change whenever the price of gold changes.
B)is controlled by central bank intervention.
C)is determined by the interaction of supply of the currency and demand for the currency.
D)is pegged against the euro.

Question

Quizplus · Accepted Answer

Under a floating exchange rate, the exchange rate is not controlled by central bank intervention or pegged against a specific currency. It is determined by the interaction of supply and demand for the currency in the foreign exchange market. Changes in factors such as interest rates, inflation, and political stability can affect the demand for a currency and therefore its exchange rate. The price of gold may also affect exchange rates indirectly, but it is not the sole determinant.

Under a Floating Exchange Rate,the Exchange Rate