Question : How can RBI help in bringing down the foreign exchange rate which is very high?
Option 1: Buying foreign exchange from market
Option 2: Selling foreign exchange from its reserves
Option 3: Increasing money supply in the economy
Option 4: None
Correct Answer:
Selling foreign exchange from its reserves
Solution : The correct answer is (b) Selling foreign exchange from its reserves
Selling foreign exchange from its reserves: The RBI can intervene in the foreign exchange market by selling foreign currency from its reserves. By increasing the supply of foreign currency, the RBI aims to decrease its value relative to the domestic currency, thus reducing the exchange rate.
It's important to note that these measures are just a few tools the RBI can use to influence the foreign exchange rate. The actual actions taken by the central bank depend on various factors and considerations, including the specific circumstances and goals of the economy.
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