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Question No. 275Interactive Test Mode
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Q275. Consider the following statements: The price of any currency in international market is decided by the 1. World Bank 2. Demand for goods/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 international market is decided by the

  1. World Bank
  2. Demand for goods/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?
Select the correct option below (or cross out options to eliminate)

Official Answer Key & Detailed Solution

Ready to check the official UPSC Answer Key?

Click any option above to test yourself under exam conditions, or reveal the explanation directly.

Official UPSC Answer KeyUPSC Prelims 2012 • Indian Economy

Correct Answer: Option (B) — 2 and 3 only

Concept & Option Breakdown

Standard Reference Verified

Statement 1 is incorrect: The World Bank does not determine currency prices or exchange rates; exchange rates are driven by foreign exchange market dynamics. Statement 2 is correct: Demand for a country's exports creates direct demand for its currency, determining its exchange rate. Statement 3 is correct: Political and government stability heavily affects capital flows and market confidence, directly impacting currency value. Statement 4 is incorrect: General long-term economic potential does not set daily or prevailing exchange rates in foreign exchange markets.

Elimination Heuristic & Exam Approach

The World Bank is a development funding agency and has no mandate to set currency prices. Eliminating statement 1 eliminates options (a) and (d).

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2012 (Q275)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Indian Economic Planning & Growth
Official Answer KeyOption (B) — 2 and 3 only

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Frequently Asked Questions — UPSC Prelims 2012 Q275

What is the official answer for UPSC Prelims 2012 GS Paper I Question 275 (Indian Economy)?

The official UPSC answer key for this 2012 Indian Economy (Indian Economic Planning & Growth) question is Option (B): "2 and 3 only". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2012 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Indian Economic Planning & Growth". You can explore all repeated questions from Indian Economic Planning & Growth in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Indian Economic Planning & Growth UPSC Prelims question using option elimination?

The World Bank is a development funding agency and has no mandate to set currency prices. Eliminating statement 1 eliminates options (a) and (d).

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