When the supply and demand of currencies in the foreign exchange market determines their relative values, this is known as
A) flexible exchange rates.
B) depreciation.
C) fixed exchange rates.
D) appreciation.

Question

Quizplus · Accepted Answer

Flexible exchange rates refer to the fluctuation in the value of currencies in response to changes in supply and demand in the foreign exchange market. The market forces of supply and demand determine the exchange rate for a particular currency, which can either appreciate or depreciate depending on the changes in the economic factors affecting the demand and supply of that currency. Flexible exchange rates are primarily determined by market forces, and the government usually intervenes only to stabilize the market.

When the Supply and Demand of Currencies in the Foreign