Under purely flexible exchange rates,
A) there is no intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate.
B) there is only occasional intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate.
C) the domestic fiscal and monetary authorities retain considerable flexibility to prevent short-run variability in the nominal exchange rate.
D) the domestic fiscal and monetary authorities retain considerable flexibility to prevent long-run variability in the nominal exchange rate.

Question

Quizplus · Accepted Answer

Under purely flexible exchange rates, there is no intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate. The exchange rate is determined by market forces of supply and demand, without any government intervention or regulation.

Under Purely Flexible Exchange Rates