Question

floating exchange rates determine the value of currency based on ___

a. something locked that does not change

b. demand for that countrys goods and servces and finacial assets

c. global demand of products, servcies and financial assers

d. deposits of foreign currency in its currency board

Answer 1

The floating exchange rate continuously changes and this actually is determined by the net demand for country's goods and services and financial assets wheel is the demand for country's currency decreases then the currency depreciates supply increases continuously and also the country currency depreciates and vice versa.

Therefore (b) is the answer to this question

Global demands of products , services and financial assets don't have a direct impact on the country's currency global deposits of foreign currency in its currency board tells about the Reserves and it is not a fixed exchange rate to be locked at a place and therefore

(a,c,d) are wrong