Question

Under the ________ exchange rate system, market forces automatically adjust the surplus and deficit in the Balance of Payments account.

Options

• fixed

• flexible

• managed floating

• dirty floating

Answer 1

Under the flexible exchange rate system, market forces automatically adjust the surplus and deficit in the Balance of Payments account.

Explanation:

• Under the flexible exchange rate system, the market forces of supply and demand determine a currency's value.
• This system allows the exchange rate to adjust automatically, helping to balance surpluses or deficits in the Balance of Payments (BOP) by influencing the flow of exports, imports, and foreign investments without government intervention.