Suppose a currency's value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority, the currency has
A) a fixed exchange rate.
B) a gold standard.
C) a price control in its exchange rate.
D) a floating exchange rate.

Question

Quizplus · Accepted Answer

A currency with a floating exchange rate is determined solely by market supply and demand without government intervention. A fixed exchange rate is determined by government intervention to maintain a specific exchange rate, while a gold standard ties a currency's value to a fixed amount of gold. Price control is a government intervention in setting a specific exchange rate for a currency, which is not present in a currency with a floating exchange rate.

Suppose a Currency's Value in the Foreign Exchange Market Is