Consider the following statements:
The price of any currency in international market is 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.
Select the correct answer using the codes below:
[UPSC Civil Services Exam – 2012 Prelims]
(a) 1, 2, 3 and 4 are correct
(b) 2 and 3 are correct
(c) 3 and 4 are correct
(d) 1 and 4 are correct
Answer: (b)
Explanation:
- World Bank is important to the source of financial and technical assistance to developing countries around the world.
- It has no relation to the price of the currency in the International Market. Hence statement 1 is not correct.
- The price of any currency is determined by forces of demand and supply. Demand for a currency depends on two factors- its exports to other countries and investments that people want to make in that currency. Hence statement 3 is correct.
- The stability of the government is a very important factor too as an unstable govt may not be able to take effective economic decisions which will, in turn, affect export and import. Hence statement 2 is correct.
- The economic potential of the country is not related to the price of any currency in the international market. Hence statement 4 is not correct.
