ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In a free-floating exchange rate system, exchange rates are determined by demand and supply. Exchange rates are determined by demand and supply in a managed float system, but governments intervene as buyers or sellers of currencies in an effort to influence exchange rates.

Detailed explanation-2: -Free Floating Exchange Rate The currency’s value is determined solely by supply and demand in the market, rather than official policy. Countries generally permit a free float only as a temporary solution, because it could result in excessive fluctuations.

Detailed explanation-3: -A floating rate is determined by the open market through supply and demand on global currency markets. Therefore, if the demand for the currency is high, the value will increase. If demand is low, this will drive that currency price lower.

Detailed explanation-4: -A floating exchange rate refers to an exchange rate system where a country’s currency price is determined by the relative supply and demand of other currencies. Currencies with floating exchange rates can be traded without any restrictions, unlike currencies with fixed exchange rates.

Detailed explanation-5: -A floating exchange rate is one that is determined by supply and demand on the open market. A floating exchange rate doesn’t mean countries don’t try to intervene and manipulate their currency’s price, since governments and central banks regularly attempt to keep their currency price favorable for international trade.