Question : Which of the following exchange rate systems allows the exchange rate to be determined solely by market forces of supply and demand?
Option 1: Fixed exchange rate
Option 2: Floating exchange rate
Option 3: Managed float exchange rate
Option 4: Pegged exchange rate
Correct Answer: Floating exchange rate
Solution : The correct answer is b) Floating exchange rate
In a floating exchange rate system, the value of a currency is determined by the market forces of supply and demand without any government or central bank intervention. The exchange rate fluctuates freely based on factors such as economic conditions, interest rates, inflation, and market expectations.
Question : Which of the following exchange rate systems allows the exchange rate to be freely determined by market forces but with occasional central bank intervention?
Question : A ________ exchange rate is determined by the forces of supply and demand in the foreign exchange market.
Question : Which of the following exchange rate systems provides the highest level of exchange rate stability?
Question : Which of the following exchange rate systems is a combination of fixed and floating exchange rates, where the central bank occasionally intervenes in the foreign exchange market?
Question : Which of the following exchange rate systems allows for fluctuations in currency values but with some intervention by the central bank?
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