When the value of one country's currency relative to that of another varies with market conditions,which of the following exists?
A) floating exchange rate
B) fixed exchange rate
C) negative balance of trade
D) international exchange rate

Question

Quizplus · Accepted Answer

When the value of one country's currency relative to that of another varies with market conditions, a floating exchange rate exists. This means the exchange rate is determined by the supply and demand for the currencies in the foreign exchange market. This is in contrast to a fixed exchange rate where the value of a currency is fixed to another currency or a basket of currencies, and does not fluctuate based on market conditions. Negative balance of trade and international exchange rate are not related to currency fluctuations.

When the Value of One Country's Currency Relative to That