Question : How can RBI help in bringing down the foreign exchange rate which is very high?
Option 1: Buying foreign exchange from market
Option 2: Selling foreign exchange from its reserves
Option 3: Increasing money supply in the economy
Option 4: None
Correct Answer: Selling foreign exchange from its reserves
Solution : The correct answer is (b) Selling foreign exchange from its reserves
Selling foreign exchange from its reserves: The RBI can intervene in the foreign exchange market by selling foreign currency from its reserves. By increasing the supply of foreign currency, the RBI aims to decrease its value relative to the domestic currency, thus reducing the exchange rate.
It's important to note that these measures are just a few tools the RBI can use to influence the foreign exchange rate. The actual actions taken by the central bank depend on various factors and considerations, including the specific circumstances and goals of the economy.
Question : Open market operations refer to the:
Option 1: Buying and selling of government securities by the central bank
Option 2: Buying and selling of goods and services in the international market
Option 3: Buying and selling of stocks and bonds in the financial market
Option 4: Buying and selling of foreign currencies in the foreign exchange market
Question : Which of the following steps should taken by the central bank if there is excessive rise in the foreign exchange rate?
Option 1: Supply foreign exchange from its stock
Option 2: Demand more of other foreign exchange
Option 3: Not intervene in the market as exchange rate is determined by the market forces
Option 4: Help central government to stabilize foreign exchange rate
Question : What is the term used to describe the difference between the buying and selling price of a currency in the foreign exchange market?
Option 1: Exchange rate spread
Option 2: Exchange rate volatility
Option 3: Exchange rate risk
Option 4: Exchange rate peg
Question : The difference between the buying and selling price of a currency in the foreign exchange market is known as the ________.
Option 1: exchange rate spread
Option 2: bid-ask spread
Option 3: spot rate spread
Option 4: forward rate spread
Question : Which of the following exchange rate systems allows the exchange rate to be determined solely by market forces of supply and demand?
Option 1: Fixed exchange rate
Option 2: Floating exchange rate
Option 3: Managed float exchange rate
Option 4: Pegged exchange rate
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