Answered

A country with a flexible exchange rate determines the value of its currency
based on:
A. a formula tied to the value of another country's currency.
B. the supply and demand for the currency in global markets.
C. the amount of international trade it plans to do in a year.
D. a prediction for the level of inflation the currency will experience.
SUBMIT

Verified Answer :

GinnyAnswer

Final answer:

Exchange rates in a flexible exchange rate system are determined by supply and demand in the market, with no direct government intervention.


Explanation:

Exchange rates in a country with a flexible exchange rate system are primarily determined by the supply and demand for the currency in the foreign exchange market. Unlike fixed exchange rate systems, where the government directly sets the value of the currency, in a flexible exchange rate system, the currency's value fluctuates based on market forces.

In this system, the government does not intervene to directly control the value of the currency. Instead, market participants, such as major international banks, determine the currency's value through their trading activities. The price of a currency relative to another currency is a reflection of the market's perception of its value.


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