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Under flexible exchange rate system, the exchange rate is determined by
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- the Central Bank of the country
- the forces of demand and supply in the foreign exchange market
- the price of gold
- the purchasing power of currencies
- the Central Bank of the country
Correct Option: B
A floating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. It refers to a country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies.