The most important feature of a floating exchange-rate system is that
A) markets establish the values for currencies.
B) central banks establish the values for their currencies.
C) governments establish the values for gold and silver.
D) governments establish the fixed values for their currencies.
E) governments buy and sell their currencies.

Question

Quizplus · Accepted Answer

In a floating exchange-rate system, market forces determine the value of a currency based on supply and demand. Governments and central banks do not have the authority to set fixed values for their currencies, unlike in a fixed exchange-rate system. This allows for greater flexibility in responding to economic conditions, but also exposes currencies to potential volatility.

The Most Important Feature of a Floating Exchange-Rate System Is