Question:
Who determines the foreign exchange rate?
Who determines the foreign exchange rate?
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In the foreign exchange market, the "invisible hand" of demand and supply is the primary force that determines rates.
Updated On: Sep 12, 2025
- Government
- Bargaining
- World Bank
- Demand and supply forces
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The Correct Option is D
Solution and Explanation
This question asks the same concept as the previous one. While governments or central banks can intervene to influence exchange rates in a "managed float" system, the fundamental determinant in a free market is the interaction of demand and supply forces. These forces reflect all the buying and selling of the currency for trade, investment, and speculation.
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