UPSC CSE Prelims
Question 98
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
Which of the statements given above are correct?
View correct answer and explanation
Correct answer: B
Correct Option: B
Explanation: The supplied 2012 key emphasises international currency demand arising from trade and investor confidence in government stability.
Statement/Item-wise Analysis:
1: Incorrect - The World Bank does not administratively determine market exchange rates.
2: Correct - Demand for a country’s exports can increase demand for its currency.
3: Correct - Stable government can bolster confidence, cross-border investment and currency demand.
4: Incorrect - Economic potential can influence long-term currency value indirectly, but the supplied key excludes it as a direct determinant.
Option-wise Analysis:
A: Incorrect - includes incorrect items 1, 4.
B: Correct - includes exactly the valid statements/items and excludes the invalid ones.
C: Incorrect - includes incorrect item 4; omits correct item 2.
D: Incorrect - includes incorrect items 1, 4; omits correct items 2, 3.
Review Note: Statement 4 is economically debatable: economic prospects can clearly affect capital flows and exchange rates; source key B is retained.