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17 August, 21:34

How are exchange rates determined in a flexible exchange rate system?

A) US dollar compared to the euro

B) inflation and deflation C) US dollar compared to the pound

D) supply and demand

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Answers (1)
  1. 17 August, 22:03
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    The correct option is D) supply and demand

    Explanation:

    In the foreign exchange market, there may be different types of exchange rate systems. A monetary system which depends on supply and demand is known to be a flexible exchange rate system. In contrast, a fixed exchange rate is a type of exchange system in which the rate is fixed by the government and monetary authority. In a flexible exchange rate system, every currency area is free to decide its exchange rate.
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