Which of the following defines a flexible exchange rate?
A)An exchange rate determined by the market
B)An exchange rate that fluctuates within a set band
C)An exchange rate that is not allowed to vary
D)An exchange rate that is backed by gold

Question

Quizplus · Accepted Answer

A flexible exchange rate is an exchange rate that is determined by the market forces of supply and demand, meaning it can fluctuate freely. This is in contrast to a fixed exchange rate, where a government or central bank sets and maintains a specific exchange rate. Option B describes a managed float, where a flexible exchange rate is set within a certain band. Option C describes a fixed exchange rate. Option D describes a gold standard, where a currency's value is directly tied to a certain amount of gold.

Which of the Following Defines a Flexible Exchange Rate