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tushargupta0691

Some countries let the foreign exchange market determine the relative value of its currency this is called a Floating Exchange.

What is the role of Floating exchange?

A floating (or flexible) exchange rate is one that is established by the unrestricted interaction of foreign exchange supply and demand.

  • The demand curve for foreign currency is dipping downward. The price of imported items in local currency rises in direct proportion to the exchange rate.
  • Lower demand for the foreign commodity and consequently less foreign money result from the higher price.

The foreign exchange supply curve is trending higher,

  • The overseas price of exported commodities decreases when the exchange rate rises, increasing both the demand for them and the supply of foreign exchange being offered in exchange for them.

Hence, the correct answer is "Floating Exchange"

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