1. What is a floating exchange rate system and what factors influence the level of a country’s exchange rate?

A floating exchange rate is when the price of money is determined only by demand and supply, no government intervention occurs. The factors, which influence the level of a country’s exchange rate are the demand and supply for the exchange rate, exports, imports and investment. Changes in trade flows (tourism), changes in cross-borders investment flows, speculation

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Answered by Zoe G. Economics tutor

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