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A country with a flexible exchange rate determines the value of its currency
based on:
O
A. the supply and demand for the currency in global markets.
B. the amount of international trade it plans to do in a year.
C. a formula tied to the value of another country's currency.
o
o
D. a prediction for the level of inflation the currency will experience.

Respuesta :

Answer:A

Explanation:

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A flexible exchange rate creates a currency value on the basis of supply and demand of currency in the foreign markets.

Option A is correct.

What is the exchange rate?

Exchange rate is the rate where one currency value expresses in terms of worldwide currency. For instance, Indian rupees is converted into US dollars. It increases the foreign exchange reserves of a country.

The demand and supply being the forces of market affect the exchange rates. The demand has the direct relation with respect to exchange rate and supply has inverse relation between the same. If demand of a currency rises, then the exchange rate also rises whereas the rate falls when the currency demand falls. The exchange rate falls if supply of home currency rises and if rate rises, then supply of home currency falls.

Therefore, the market forces in respect of currency value affect the exchange rate system if a country.

Learn more about exchange rate in the related link:

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