The exchange rate for a foreign currency that is determined by supply and demand is
A) a fixed exchange rate.
B) a controlled exchange rate.
C) a constrained exchange rate.
D) a flexible exchange rate.

Question

Quizplus · Accepted Answer

A flexible exchange rate is determined by the supply and demand of the currency on the foreign exchange market. It can fluctuate according to factors such as economic conditions, political events, and interest rates. This is in contrast to a fixed exchange rate, which is set by a government or central bank, or a controlled exchange rate, which is influenced by government policies or interventions. A constrained exchange rate is not a commonly used term in finance and economics.

The Exchange Rate for a Foreign Currency That Is Determined