alleryStart learning →A policy that allows the foreign exchange market to set exchange rates is called a:
AFixed exchange rate
BFrozen exchange rate
CForced exchange rate
DFloating exchange rate
Answer & Solution
Correct answer: D. Floating exchange rate
1. Governments choose how much to intervene.
2. Exchange rates can be set by markets or by policy.
3. A policy which allows the foreign exchange market to set exchange rates has a name.
4. That is a floating exchange rate.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 15 'Exchange Rates and International Capital Flows'_
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