Net Exports and International Finance

KEY TAKEAWAYS

• In a free-floating exchange rate system, exchange rates are determined by demand and supply.
• Exchange rates are determined by demand and supply in a managed float system, but governments intervene as buyers or sellers of currencies in an effort to influence exchange rates.
• In a fixed exchange rate system, exchange rates among currencies are not allowed to change. The gold standard and the Bretton Woods system are examples of fixed exchange rate systems.