What is called a country's decision to allow its currency value to change freely?
Correct answer: B. Floating exchange rate
- A. Pegged exchange rate
- B. Floating exchange rate
- C. Liberal exchanged rate
- D. Open exchange rate
Explanation
Under a floating exchange rate, the currency’s value is determined mainly by market demand and supply rather than being fixed by the government. A pegged rate, by contrast, is tied to another currency or a specified value.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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