which of the following statements is true? group of answer choices with floating exchange rates, the foreign exchange market determines the exchange rate, whereas with a merging currencies approach, a nation adopts another country’s currency. with hard exchange rate pegs, the market determines the exchange rate with some intervention from the central bank, whereas with soft exchange rate pegs, the central bank sets a fixed currency. the main difference between floating exchange rates and soft exchange rate pegs is that the market completely determines soft exchange rate pegs, while floating exchange rates are influenced by central bank interventions on occasion. floating exchange rates are relatively stable, whereas merging currencies can change a great deal in a short time.

The true statement about a floating exchange rates is that with its adoption, the foreign exchange market can determines the exchange rate whereas with a merging currencies approach, a nation adopts another country’s currency. The Option A is correct.

What is a Floating Exchange Rate?

In economics, a floating exchange rate refers to a regime whereby the currency price of a nation is set by the Forex market based on supply and demand relative to other currencies. This regime is in contrast to a fixed exchange rate in which the government entirely or predominantly determines the rate.

Most country's currency prices can be determined in two ways: either by a floating rate or a fixed rate. As the mentioned above, the floating rate is usually determined by the open market through supply and demand, therefore, if the demand for the currency is high, the value will increase. If demand is low, this will drive that currency price lower.

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