Under a flexible exchange rate system,there is no need for foreign exchange reserves.

Name: Under a flexible exchange rate system,there is no need for foreign exchange reserves.
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Question

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Under a flexible exchange rate system, the value of the currency is determined by the forces of supply and demand in the foreign exchange market. There is no need for the central bank to intervene in the market to maintain a fixed exchange rate. Therefore, the central bank does not need to hold foreign exchange reserves.

Under a Flexible Exchange Rate System,there Is No Need for Foreign