A currency with a flexible exchange rate has its value set by: A. supply and demand for the currency in the global market. B. the rise or fall of the country's gross domestic product. C. the amount of gold held in the country's reserves. D. a certain proportion of the value of another country's currency.

A currency with a flexible exchange rate is determined primarily by the ever-changing dance of supply and demand in the global market. Picture it like a bustling marketplace where currencies are bought and sold based on how much people are willing to pay. This dynamic creates fluctuations in value that can be as thrilling as a rollercoaster ride! When applying this concept in the real world, businesses engaged in international trade must constantly monitor currency values. For example, a U.S. company importing goods from Europe will benefit when the dollar strengthens against the euro, as it will cost less to buy those goods. Conversely, it could become pricier if the dollar weakens, emphasizing the importance of hedging strategies to minimize risks associated with exchange rate fluctuations.