Final answer:
After the collapse of the Bretton-Woods system, the United States adopted a floating (flexible) exchange rate system, which permitted the US dollar's value to be determined by the foreign exchange market. Option b
Step-by-step explanation:
Following the dissolution of the Bretton-Woods system in the early 1970s, the United States moved away from a fixed exchange rate system.
Instead, the dominant exchange rate system that emerged was a floating exchange rate. This type of regime allows the value of the currency to be determined by the foreign exchange market without direct government or central bank intervention to maintain the currency at a fixed value against another currency.
An exchange rate regime in which governments allow their currencies to fluctuate within margins, without fixed values, is referred to as a floating (flexible) exchange rate system. Accordingly, the correct answer to the student's question would be option b) Floating exchange rate.
The adoption of this system can allow for automatic adjustment of the currency value based on supply and demand forces. It can also grant central banks the flexibility to implement monetary policies aimed at domestic objectives like controlling inflation or unemployment, without having to maintain exchange rate parity.
However, this might lead to increased volatility in exchange rates and can occasionally result in large and unexpected shifts in the value of the currency. Option b