Multiple choice

All but one of the following statements are incorrect. Find the correct statement.

  1. Balance of payments is a narrow concepts than balance of trade

  2. India is facing severe foreign exchange reserves crunch

  3. Devaluation is panacea for BOP problem

  4. The RBI is the lender of last resort for Indian public sector banks

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The RBI acts as lender of last resort for banks facing liquidity crises, providing emergency funds when banks cannot borrow elsewhere. Option A is incorrect because balance of payments is a broader concept than balance of trade (which only covers goods). Option B is factually incorrect as India maintains substantial foreign exchange reserves. Option C is wrong because devaluation is not a cure-all for balance of payments problems.

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