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Floating Currency

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Floating Currency
A currency whose value is determined by the free market. That is, the value of a floating currency changes constantly depending on the supply and demand for that currency, as well as the amount of the currency held in foreign reserves. An advantage to a floating currency is that it tends to be more economically efficient. However, floating exchange rates tend to be more volatile depending on the particular currency. A floating currency may undergo currency appreciation or currency depreciation, depending on market fluctuations. Most major currencies are floating currencies See also: Fixed exchange rate, Crawling peg, Managed float.


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With the floating currency system, depending on the state of the market, inflation, and demand, both the dollar and the value of gold can increase or decrease considerably.
For the central bankers trying to manage this volatile situation, there was a familiar and difficult choice between the flexibility of a floating currency and the stability of one fixed to gold.
And our flexible labour market and floating currency will make it much easier for our economy to adjust to the recession than will be the case for some Continental neighbours.
 
 
 
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