When the foreign exchange market determines the relative value of a cu

QUESTION

When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a pegged exchange rate regime.

Indicate whether the statement is true or false.

ANSWER

FALSE
When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a floating exchange rate regime. Four of the world’s major trading currencies—the U.S. dollar, the European Union’s euro, the Japanese yen, and the British pound—are all free to float against each other.