In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1) The foreign currency earnings of India’s IT sector 2) Increasing the government expenditure 3) Remittances from Indians abroad Select the correct answer using the code given below.

Question

CollectorBabu · Accepted Answer

Correct Answer: 1 and 3 only. A currency crisis happens with a decline in the value of a country's currency, which negatively affects an economy by creating instabilities in the exchange rates. A substantial amount of foreign exchange reserves can help to cushion up against any risk of the currency crisis.  Statement 2 will not bring any foreign currency into the country unless the expenditure borne by the government results in a foreign company undertaking any specific task. Whereas the other 2 options i.e. statement 1 and 3 would ensure foreign currency flight into the country thereby reducing external currency crisis.

Contact Information

Services