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Questions
What is a flexible (floating) exchange rate system?
What is a flexible rate of exchange?
What do you understand by flexible rate of exchange?
Short Answer
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Solution
In a system with a flexible exchange rate, supply and demand dictate the exchange rate on the foreign currency market. The central bank in this system lets the exchange rate fluctuate in order to balance the supply and demand of foreign currency. Floating exchange rates are another name for flexible exchange rates.
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Notes
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