Question : Which of the following is a function of the International Monetary Fund (IMF) in relation to foreign exchange rates?

Option 1: Regulating global trade agreements
  

Option 2: Maintaining stable exchange rates
 

Option 3: Providing loans to developing countries

  

Option 4: Setting interest rates for member countries

Correct Answer: Maintaining stable exchange rates

Solution : The correct answer is b) Maintaining stable exchange rates

One of the functions of the International Monetary Fund (IMF) in relation to foreign exchange rates is to promote and maintain stable exchange rates among its member countries. The IMF aims to foster international monetary cooperation and stability by providing a platform for member countries to discuss and coordinate their exchange rate policies.

While the IMF does not directly set exchange rates, it monitors and assesses the exchange rate policies of member countries, provides recommendations on exchange rate management, and offers technical assistance to countries seeking to achieve stability in their exchange rates.

Regulating global trade agreements, option a, is not a direct function of the IMF. The World Trade Organization (WTO) is primarily responsible for establishing and enforcing global trade rules.

Providing loans to developing countries, option c, is another significant function of the IMF. The IMF provides financial assistance and loans to member countries facing balance of payments difficulties to help stabilize their economies and address financial imbalances.

Setting interest rates for member countries, option d, is not a function of the IMF. The responsibility for setting interest rates lies with the central banks of individual countries.