QUESTION

Medium

Economy

Prelims 2012

Consider the following statements: The price of any currency in the international market is decided by the

  1. World Bank
  2. demand for goods/services provided by the country concerned
  3. stability of the government of the concerned country
  4. economic potential of the country in question

Which of the statements given above are correct?

Select an option to attempt

Explanation

The price of any currency in the international market is primarily determined by the demand for goods and services provided by the country. This is because if a country's goods and services are in high demand globally, then the demand for its currency will also increase, leading to an increase in its value.

The stability of the government of the concerned country also plays a role as it affects investor confidence. A stable government is more likely to have sound economic policies, which can lead to a stronger currency.

The World Bank does not decide the price of a currency in the international market. The economic potential of a country can influence the demand for its goods and services, but it does not directly decide the price of the currency.

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