A system in which the exchange rate is determined primarily by market forces is called:

Question

Quizplus · Accepted Answer

A floating exchange rate system is one in which market forces determine the exchange rate between two currencies. In a floating exchange rate system, exchange rates can fluctuate based on factors such as supply and demand, inflation, and interest rates. The opposite of a floating exchange rate system is a fixed exchange rate system, where the exchange rate is pegged to another currency or a commodity. Dirty float and dollarization are different exchange rate systems altogether, and not applicable here.

A System in Which the Exchange Rate Is Determined Primarily