with a flexible exchange rate system,how is the exchange rate of a currency determined

Question

rina.r · Answer

http://www.rba.gov.au/mkt-operations/ex-rate-rba-role-fx-mkt.html http://www.s-cool.co.uk/a-level/economics/exchange-rates/revise-it/how-is-the-exchange-rate-determined this might help u!!

anonymous · Answer

When we talk about a flexible exchange rate, it means that the exchange rate is not fixed its allowed to float freely. It is determined by the private market forces of demand and supply. A floating rate is often termed "self-correcting," as any differences in supply and demand will automatically be corrected in the market.

For Example:
If demand for a currency is low, its value will decrease, thus making imported goods more expensive and stimulating demand for local goods and services. This in turn will generate more jobs, causing an auto-correction in the market. A floating exchange rate is constantly changing. 

Do you get it?

anonymous · Answer

The explanation by Arbab Shah is spot on, this leads to currency markets as explained in this wiki ( http://en.wikipedia.org/wiki/Foreign_exchange_market)