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A floating exchange rate system is designed to reflect the demand and supply conditions of currencies in the international market. It provides flexibility by allowing exchange rates to adjust automatically in response to trade flows, capital movements, and macroeconomic policies. However, the effectiveness of such a system depends on the credibility and discipline of government policies. When governments disregard market signals and intervene excessively, the very ________ __________ ______ ___ _________ ____ _______ _____ ______ ___ _______.
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