What describes a floating exchange-rate system?

A floating exchange-rate system is characterized by the value of a currency being determined by market forces such as supply and demand. In such systems, the currency's value can fluctuate freely based on various factors including economic indicators, market sentiment, and geopolitical events. This allows for greater flexibility and can lead to more responsive adjustments in the exchange rate according to real-time economic conditions.

Other options do not accurately describe a floating exchange-rate system. For example, a fixed exchange rate, where the currency value is set and maintained by a government or central bank, contrasts with the floating model. Similarly, a currency backed by gold pertains to a gold standard, which is also different from a system that allows for market-driven currency valuation. Lastly, a system controlled by the government indicates a managed exchange rate rather than a floating one, where the market largely influences currency values without direct interference.