The term "flexible exchange rates" refers to
A) a situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand.
B) the increase in the exchange value of one nation's currency in terms of an other nation.
C) a nation in which households, firms, and governments buy and sell national currencies.
D) the decrease in the exchange value of one nation's currency in terms of another nation.

Question

Quizplus · Accepted Answer

Flexible exchange rates refer to a system where exchange rates are determined based on the forces of supply and demand in the open market. In such a system, exchange rates are allowed to fluctuate freely, depending on changes in economic conditions, such as changes in interest rates, inflation, and trade balances. This is in contrast to fixed exchange rate systems, where the government or central bank sets the exchange rate and intervenes in the foreign exchange market to maintain it.

The Term "Flexible Exchange Rates" Refers to