Describe the difference between fixed and floating exchange rate systems.

Floating rate systems rely on supply and demand to set exchange rates with little government intervention. The fixed rate system put in place after World War II involved an agreement under which each nation would maintain its currency's exchange rate with the U.S. dollar nearly constant. To accomplish that, nations attempted to offset market movements by buying and selling their own currencies in foreign exchange markets. Maintaining constant exchange rates proved very difficult, and the present floating rate system was adopted in the 1970s.