Macro

Balance of Payments

Easy

Flexible exchange rate is determined by:

RBI

Govt

Market forces

IMF

✅ Correct Option: 3

Under a flexible (floating) exchange rate system, the exchange rate is determined by the free interaction of demand and supply for foreign exchange in the market. RBI, government, or IMF do not fix it (they fix it only under a managed or pegged system).

2025: 21 May Shift 1

Under __________ system, the central bank intervenes to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate.

2026: 23 May Shift 1

Which one of the following is the major advantage of flexible exchange rate system?

2025: 30 May Shift 2

In modern economies, countries interact through various channels, Which market is not an example of these linkages?

2026: 6 June Shift 1

Match List-I with List-II

List-I	List-II
(A) Devaluation	(I) When the government decreases the exchange rate of foreign currency.
(B) Foreign Exchange Market	(II) Exchange rate is determined by the market forces.
(C) Revaluation	(III) The market in which national currencies are traded for one another.
(D) Floating Exchange Rate	(IV) Government action increases the exchange rate of foreign currency.

Choose the correct answer from the options given below:

2026: 6 June Shift 1

The reserve bank sells foreign exchanges when there is a deficit in the balance of payment. This sale is called?

2026: 23 May Shift 1

Which of the following statements are correct in respect to Balance of payment?

A. Exports of goods are entered on debit side.

B. Transfer payments are receipts without rendering any services in return.

C. Capital account includes external borrowings.

D. Net invisibles are the part of current account.

Choose the correct answer from the options given below:

Flexible exchange rate is determined by:

Solution

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