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Consider the following statements: The price of any currency in the international market is decided by the  1. World Bank 2. demand for good/services provided by the country concerned 3. stability of the government of the concerned country 4. economic potential of the country in question Which of the statements given above are correct?

Consider the following statements: The price of any currency in the international market is decided by the  1. World Bank 2. demand for good/services provided by the country concerned 3. stability of the government of the concerned country 4. economic potential of the country in question Which of the statements given above are correct? Correct Answer 2 and 3 only

The correct answer is 2 and 3 only.

Key Points

  • World Bank is important to the source of financial and technical assistance to developing countries around the world.
    • It has no relation to the price of the currency in the International Market. Hence statement 1 is not correct.
  • The price of any currency is determined by forces of demand and supply. Demand for a currency depends on two factors- its exports to other countries and investments that people want to make in that currency. Hence statement 3 is correct.
  • The stability of the government is a very important factor too as an unstable govt may not be able to take effective economic decisions which will, in turn, affect export and import. Hence statement 2 is correct.
  • The economic potential of the country is not related to the price of any currency in the international market. Hence statement 4 is not correct.

Related Questions

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Most economists in the United States seem captivated by the spell of the free market. Consequently, nothing seems good or normal that does notaccord with the requirements of the free market. A price that is determined by the seller or, for that matter (for that matter: so far as that isconcerned), established by anyone other than the aggregate of consumers seems pernicious. Accordingly, it requires a major act of will to thinkof price-fixing (the determination of prices by the seller) as both "normal" and having a valuable economic function. In fact, price-fixing is normalin all industrialized societies because the industrial system itself provides, as an effortless consequence of its own development, the price-fixingthat it requires. Modern industrial planning requires and rewards great size. Hence, a comparatively small number of large firms will be competingfor the same group of consumers. That each large firm will act with consideration of its own needs and thus avoid selling its products for morethan its competitors charge is commonly recognized by advocates of free-market economic theories. But each large firm will also act with fullconsideration of the needs that it has in common with the other large firms competing for the same customers. Price-fixing is a phenomenon that is normal in -
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