Some countries rely on the foreign exchange market to determine the relative value of its currency. This is called a __________ exchange rate system.单项选择题
A
pegged
B
fixed
C
forward
D
nominal
E
floating

Question

Some countries rely on the foreign exchange market to determine the relative value of its currency. This is called a __________ exchange rate system.

BlackTom AI · Accepted Answer

A floating exchange rate system lets supply and demand in the foreign exchange market determine a currency’s value without a government or central bank fixing the rate.

1) Relevant knowledge points and concepts
- Exchange rate regimes: fixed (or pegged) vs. floating. In a fixed/pegged system, authorities set and maintain an exchange rate against another currency or a basket. In a floating system, market forces (foreign exchange supply and demand) set the rate. A managed (or dirty) float is a variant where authorities occasionally intervene. “Forward” is a type of contract, not a regime. “Nominal” describes the unadjusted value (nominal vs. real exchange rate), not a regime type.

2) Step-by-step reasoning
- The question states the country “relies on the foreign exchange market to determine the relative value of its currency.” That phrase means the currency’s price is set by market transactions (buyers and sellers of currency).
- Which regime matches that description? A floating exchange rate is defined exactly as a system where market forces determine the rate.
- Evaluate each option against that definition.

3) Intermediate logical steps (no numerical calculations needed)
- Pegged: implies deliberately tying the currency to another — not market-determined.
- Fixed: implies an official set rate — not market-determined.
- Forward: is a contract for future delivery of currency — not an exchange-rate system.
- Nominal: an attribute (nominal value), not a regime.
- Floating: explicitly market-determined.

4) Why the correct answer is correct
- “Floating” directly corresponds to the mechanism described: relying on the foreign exchange market to set the exchange rate. Market participants’ trades cause appreciation or depreciation according to supply and demand.

5) Why the other options are incorrect (brief)
- Pegged/fixed: require official stabilization against another currency; contradict “relies on the market.” Forward: financial instrument, not a regime. Nominal: descriptive term for value, not a system.

6) Conclusion
The correct answer is floating, which matches the provided answer.

Some countries rely on the foreign exchange market to determine the relative value of its currency. This is called a __________ exchange rate system.单项选择题

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