Consider the following statements: The price of any currency in international decided by the
- World Bank
- Demand for goods/services provided by the country concerned
- Stability of the government of the concerned country
- Economic potential of the country in question
Which of the statements given above are correct?
[UPSC Civil Services Exam – 2012 Prelims]
(a) 1, 2, 3 and 4
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1 and 4 only
- The World Bank serves as a crucial source of financial and technical assistance for developing countries worldwide. However, it does not directly influence the pricing of currencies in the international market. Therefore, statement 1 is incorrect.
- The stability of a government is a significant factor that affects economic decision-making, which, in turn, impacts a country’s exports and imports. Thus, statement 2 is correct.
- The price of a currency in the international market is determined by the forces of demand and supply. The demand for a currency depends on factors such as its exports to other countries and the investments that individuals and entities wish to make in that currency. Therefore, statement 3 is correct.
- The economic potential of a country is not directly tied to the price of its currency in the international market. Hence, statement 4 is incorrect.