Exchange rate determined by the market forces of demand and supply is also known as...

Option 1 -> Fixed Exchange Rate is set and maintained by the government or central bank, not by market forces.

Option 2 -> Floating Exchange Rate is determined entirely by market forces of demand and supply without government intervention.

Option 3 -> Managed Floating Exchange Rate involves some government intervention along with market forces.

Option 4 -> Foreign Exchange Rate is a general term, not a specific type of exchange rate system.

Hence, Option 2: Floating Exchange Rate -> In a floating exchange rate system, the value of a currency is allowed to fluctuate freely based on market dynamics. When demand for a currency increases, its value rises; when supply increases or demand decreases, its value falls. There is no government or central bank intervention to fix or maintain a particular rate. This system allows for automatic adjustment to economic changes and is also called a flexible exchange rate system. -> correct