[Solved] Which of the following is a characteristic of a floating exchange rate system? — Ans: Exchange rates fluctuate according to market demand and supply | Economic Awareness

Economic Awareness - Sectors of Indian Economy

Which of the following is a characteristic of a floating exchange rate system?

AExchange rates are fixed by the government

BExchange rates fluctuate according to market demand and supply

CExchange rates are pegged to gold

DExchange rates remain constant over long periods

Step-by-Step Solution

Step 1: Understand exchange rate systems
Floating exchange rate systems allow currency values to fluctuate based on market forces without direct government control.
Step 2: Analyze options
Fixed exchange rates are set by governments, pegged rates relate to gold or another currency, and constant rates over long periods are rare in floating systems.
Final Answer:
Exchange rates fluctuate according to market demand and supply → Option B
Quick Check:
Floating exchange rate = market-driven fluctuations ✅

Quick Trick: Floating = fluctuates freely with market forces.

Common Mistakes:

MISTAKES

Master "Sectors of Indian Economy" in Economic Awareness

Start learning the concept with an interactive lesson.

More Economic Awareness Quizzes

Which of the following is a characteristic of a floating exchange rate system?