Home UPPSC Prelims 2025 Mock Test Series MCQs

Question

Under which of the following exchange rate regimes does the value of a currency fluctuate based on market forces?

  1. Fixed Exchange Rate
  2. Managed Float
  3. Pegged Exchange Rate
  4. Free Float

Answer:

Option D: Free Float

Detailed Solution:

The correct answer is “Free Float”.

Under a free float exchange rate regime, the value of a currency is determined by the forces of supply and demand in the foreign exchange market, with minimal government intervention.