passwella.
Menu

JAMB Economics 2003 Question 32

Question 32

Balance of Payments and Exchange Rates

Under a floating exchange rate regime, the determinant of the exchange rate is

  1. A.an Act of the National Assembly
  2. B.the highest denomination of the currency
  3. C.demand for and supply of foreign goods
  4. D.the system of government
Show the answer and explanation

Answer: C (demand for and supply of foreign goods)

Explanation

Under a floating system the exchange rate is set by market forces of demand and supply, which come from trade in foreign goods and services.