The 'fixed exchange rate system' requires the central bank to: MCQ with Answer and Explanation

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The 'fixed exchange rate system' requires the central bank to:

A. let the exchange rate move freely

B. abolish foreign exchange reserves

C. float the currency

D. intervene to maintain the rate within a narrow band

Answer: Option D

Solution (By JKSSB Mock Tests)

Under a fixed exchange rate, the central bank intervenes to maintain the currency value.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

A 'merit good' is a good that:

A. is consumed voluntarily

B. the government encourages or provides because it has positive externalities and is under-consumed

C. has negative externalities

D. is only for the rich

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Correct Answer: Option B

Explanation:
Merit goods are under-consumed if left to the market, so government encourages their provision.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'unbalanced growth theory' was proposed by:

A. Paul Rosenstein-Rodan

B. Arthur Lewis

C. Albert Hirschman

D. John Maynard Keynes

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Correct Answer: Option C

Explanation:
Albert Hirschman proposed the theory of unbalanced growth.

This question belongs to: Economy GK Economy Set 1

Question #3

The Harrod-Domar growth model emphasizes the role of:

A. population growth

B. technological progress

C. saving and capital-output ratio

D. natural resources

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Correct Answer: Option C

Explanation:
The Harrod-Domar model emphasises saving rate and capital-output ratio as determinants of growth.

This question belongs to: Economy GK Economy Set 1

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