Floating Exchange Rate

    2. graph TD;
	    A[Floating Exchange Rate]
	    A --> B[Demand]
	    A --> C[Supply]
	    A --> D[Market Trends]
	    E[Government Interventions] --> A

## Which determines the value of a floating exchange rate? - [x] Market supply and demand - [ ] Government decree - [ ] Fixed set value - [ ] Sentiments of a hamster named Frank > **Explanation:** The floating exchange rate is determined predominantly by market forces and supply and demand dynamics, not by magical hamsters… #sadly. ## A government intervenes in a floating exchange rate mainly because? - [x] To stabilize currency fluctuations - [ ] To buy ice cream - [ ] They lost a bet - [ ] They’re bored > **Explanation:** Governments intervene to help stabilize a currency and keep it favorable for trade, not for ice cream or personal whims—though that might be a fun excuse! ## Which of the following is NOT a characteristic of floating exchange rates? - [ ] Fluctuates based on the market - [x] Pegged to another currency - [ ] Subject to market sentiments - [ ] Can be influenced by government intervention > **Explanation:** Pegging a currency ties it to another, which contradicts the floating nature; it's like trying to hold on while surfing… on a calm lake! ## The Bretton Woods Agreement ended due to? - [ ] Currency manipulation - [x] Inflexibility of fixed rates - [ ] Excessive laughs in the meetings - [ ] Not enough unicorns > **Explanation:** The Bretton Woods system crashed because it was too rigid, not because of a suspected unicorn shortage… we wish! ## Which is true about the Forex market? - [ ] It has no effect on a floating exchange rate - [x] It is where foreign currencies are exchanged - [ ] It’s a forum for debating puppies - [ ] Only operates on weekends > **Explanation:** The Forex market is a bustling hub for currency exchange—sadly, no puppy debates (at least in the financial sense). ## Central banks usually intervene in floating exchange rates because? - [ ] They like to surprise the market - [ ] They want higher taxes - [x] To protect their country’s economy - [ ] They lost a wager > **Explanation:** They want to protect their country's economy—the central bank is like that parent who steps in to prevent a chaotic playdate. ## Floating exchange rates became more popular after which event? - [x] The collapse of the gold standard - [ ] A weekend barbecue party - [ ] The invention of the smartphone - [ ] A new rollercoaster > **Explanation:** It was the end of the gold standard, not a party or a rollercoaster that shifted the movement toward floating rates! ## An example of a fixed exchange rate would be? - [ ] US Dollar - [ ] Euro - [x] Hong Kong Dollar pegged to the US Dollar - [ ] Cryptocurrencies > **Explanation:** The Hong Kong Dollar is truly the well-behaved child, following the lead of the US Dollar shadow! ## Why do some governments prefer a floating exchange rate? - [x] Greater flexibility in economic representation - [ ] More cake - [ ] Easier to play Monopoly - [ ] Boredom with fixed rates > **Explanation:** Flexibility allows countries to react to new economic shifts—unfortunately, no actual cake involved. ## Which condition is more stable? - [x] Fixed exchange rate - [ ] Floating exchange rate - [ ] The amount of coffee in a day - [ ] Internet memes > **Explanation:** A fixed exchange rate offers more stability, unlike the unpredictable nature of coffee consumption and internet humor.