Correct Answer: Floating exchange rate

Solution : A floating exchange rate system is a system where exchange rates are determined by market forces of supply and demand without government intervention. In a floating exchange rate system, exchange rates fluctuate freely and are not fixed.

The other options listed are fixed exchange rate systems:

b) Pegged exchange rate is a fixed exchange rate system where a country's exchange rate is fixed to the value of another currency, such as the US dollar or the euro.

c) Managed float exchange rate is a hybrid system where exchange rates are allowed to fluctuate within a certain range, but central banks may intervene to influence the exchange rate if necessary.

d) Currency board arrangement is a fixed exchange rate system where a country's central bank holds reserves of a foreign currency and commits to exchange the domestic currency for the foreign currency at a fixed exchange rate.

In each of these fixed exchange rate systems, the exchange rate is set or managed by a central authority, rather than being determined by market forces.