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question_answer1) Directions: Q. 1 to 5 Read the following case study and answer the questions. Indian's exchange rate policy has evolved in line with international and domestic developments. Post-independence, in view of the prevailing Bretton Woods system, the Indian rupee was pegged to the Pound sterling. With the breakdown of the Bretton Woods system, and also the declining share of UK in India's trade, the rupee was delinked from the Pound sterling in September, 1975. During the period between 1975 to 1992, the exchange rate was officially determined by the RBI within nominal band of plus or minus 5 percent of the weighted basket of currencies of India's major trading partners. This exchange rate was referred to as 'adjustable nominal peg with a band'.. Post-independence, the exchange rate was determined under
question_answer2) Assertion [A] Under fixed exchange rate system, country's government is responsible for changing the price of foreign exchange as per the developmental needs. Reason [R] Increase in the value of domestic currency as planned by the central bank is revaluation of domestic currency.
question_answer3) Immediately after independence, Indian rupee was pegged to the ......... .
question_answer4) Indian currency was delinked from pound sterling on
question_answer5) The rupee was delinked from Pound sterling in 1975 because
question_answer6) Direction: Q. 6 to 10 Read the following case study and answer the questions. In the Indian context, the RBI Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. RBI acts as the chief monetary authority and the custodian of foreign exchange assets. RBI accumulates foreign currency reserves by purchasing from authorised dealers in the open market operations. The type of instruments in which RBI can invest is stipulated in the RBI Act. The aid received by the government also becomes a part of the reserves. The Asian crisis tells us how countries suffer due to ill management of the foreign exchange reserves. Many countries foresaw the vulnerability to the external shocks and accumulated heavy foreign exchange reserves. Countries want to keep their exports competitive. Hence, they prefer to depreciate their currencies against dollars. In recent days, there has been a continuous appreciation of rupee vis-a-vis dollar. To avoid the appreciation of rupee, RBI has been continuously interfering in the money market. RBI is buying dollars from the market. The dollars that are being bought add to the foreign exchange kitty. Unlike, in the past, the NRI community is more dispersed now, not just confining to the Gulf. Due to software boom, Indians are heading towards new destinations. NRIs are doing well there and ploughing back their savings to India. Moreover, foreign institutional investors are also making huge investments into Indian stocks. The emergence of India as an offshore outsourcing hub has created new opportunities. There are huge dollar earnings for India. Further, India is also proving to be a worthy manufacturing hub for many companies. All these factors played a positive role in building up of huge foreign exchange reserves. RBI's intervention in the foreign exchange market makes the exchange rate ......... .
question_answer7) During the economic crisis of 1990s, India opted for which of the following foreign exchange measure?
question_answer8) Assertion [A] During the Asian crisis, many countries foresaw the vulnerability to the external shocks and accumulated heavy foreign exchange reserves. Reason [R] India devalued its currency during the 1990 to improve its export competitiveness
question_answer9) To avoid appreciation of currency, RBI should opt for
question_answer10) The above case depicts the example of which of the following types of exchange rate system in India?
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