The Modern Exchange Rate System

Today most major currencies are traded freely, with their value floating according to the forces of supply and demand. The official price of gold was formally abolished. Governments became free to choose the type of exchange rate system that best suited their individual needs. Fixed exchange rate systems were given equal status with floating exchange rate systems. Countries were no longer compelled to maintain specific pegged values for their currency. Instead, they were urged to pursue domestic economic policies that would support the stability of their currency relative to others. The exchange rate system today consists of two main types of foreign exchange management: the floating system and the fixed system. ...

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