Macro

Balance of Payments

Medium

Arrange the following in correct sequence with respect to exchnage rate :-

(A) The central bank purchases dollars to absorb the excess supply.

(B) The exchange rate is fixed by the government higher than the market rate of exchange.

(C) The government wants to encourage exports.

(D) Supply of the dollars exceeds the demand for the dollar.

Choose the correct answer from the options given below:

(B), (A), (D), (C).

(D), (A), (C), (B).

(C), (A), (D), (B).

(C), (B), (D), (A).

(B), (A), (D), (C).

(D), (A), (C), (B).

(C), (A), (D), (B).

(C), (B), (D), (A).

✅ Correct Option: 4

Option 4: (C), (B), (D), (A) -> This represents the correct logical sequence of events in exchange rate management. First, (C) the government identifies the policy objective of encouraging exports. To achieve this, (B) the government fixes the exchange rate higher than the market rate (meaning more domestic currency per dollar, making domestic currency cheaper and exports competitive). This policy leads to (D) increased export earnings causing supply of dollars to exceed demand. Finally, (A) the central bank intervenes by purchasing the excess dollars to maintain the fixed exchange rate and prevent it from falling below the desired level. This sequence demonstrates how fixed exchange rate regimes require active central bank intervention to maintain the peg. -> correct

2025: 3 June Shift 1

The measurement of Balance of Payments deficit is based on ___________ transactions.

2026: 20 May Shift 1

From the given data, find out the Current Account Balance.

Items	Amount (in Rs. crore)
Exports of goods	280
Imports of goods	360
(Net) Invisibles
(a) Non factor services	50
(b) Income	-20
(c) Transfers	35

2022: 30 Aug Shift 2

Match List - I with List - II.

List - I (Concept)	List - II (Meaning)
(A) Trade surplus	(I) Excess of the payments for import of goods over the receipts for export of goods
(B) Devaluation of currency	(II) Excess of exports of goods over the imports of goods
(C) Trade deficit	(III) Fall in the external value of a domestic currency as notified by the government of the country
(D) Balance of trade	(IV) Difference between the value of exports and value of imports of goods of a country

Choose the correct answer from the options given below :

2026: 23 May Shift 1

Which one of the following statements is correct about the balance of payment (BOP)?

2025: 13 May Shift 1

When an individual buys foreign goods, this spending is known as .....

2022: 30 Aug Shift 2

Arrange the following statements relating to appreciation of domestic currency in the correct sequence.

(A) The demand curve for foreign exchange shifts to the right of the original demand curve

(B) Due to some reason the exchange rate falls to 1$ = Rs. 70

(D) This increase the demand for foreign goods and services by Indians

Choose the correct answer from the options given below :

Solution

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