The exchange rate system that provides an automatic balance-of-payments adjustment regardless of domestic economic policies is best described as
A) fixed.
B) flexible.
C) indexed.
D) pegged.
E) the gold exchange.

Question

Quizplus · Accepted Answer

The exchange rate system that provides an automatic balance-of-payments adjustment regardless of domestic economic policies is a flexible exchange rate system. In this system, the exchange rate is determined by market forces of supply and demand, and can adjust up or down to reflect changes in these forces. This means that even if domestic economic policies are not designed to address the balance of payments, the exchange rate can still adjust to correct for any imbalances.

The Exchange Rate System That Provides an Automatic Balance-Of-Payments Adjustment