Question

When the exchange rates are allowed to be determined by supply and demand, they are called which of the following?a. flexiblec. directb. fixedd. indirect

Answer 1

Answer:

Flexible

Explanation:

Flexible exchange rate system is a monetary system that is determined by the forces of demand and supply in the foreign exchange market, just like the price of a commodity. In response to the demand and supply change, the currency value is allowed to fluctuate freely without any form of government intervention or control by central banks.  

What Individuals who buy and sell currency in international market think the currency is worth affects the flexible rates, and their judgments are centered on the strength of the economy, debt levels of the country and interest rates of central banks.