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      Question

      The exchange rate system where the value of a currency

      is determined by market forces is called a:
      A Fixed exchange rate Correct Answer Incorrect Answer
      B Floating exchange rate Correct Answer Incorrect Answer
      C Pegged exchange rate Correct Answer Incorrect Answer
      D Managed exchange rate Correct Answer Incorrect Answer

      Solution

      In a floating (or flexible) exchange rate system, the currency's value is allowed to fluctuate in response to foreign exchange market mechanisms without direct government or central bank intervention.

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