Rupee Volatility and Management — Prelims Questions

Consider the following statements about India's exchange rate management: 1. RBI follows a pure floating exchange rate system with no intervention 2. Sterilized intervention allows RBI to manage exchange rates without affecting domestic money supply 3. Foreign exchange reserves can only be used for import financing, not for currency intervention 4. FEMA 1999 provides legal framework for RBI's exchange rate management powers Which of the statements given above are correct?

During the 2013 'taper tantrum', which of the following measures were adopted by RBI to manage rupee volatility? 1. Raising repo rate to defend the currency 2. Introducing forex swap windows for banks 3. Tightening gold import norms 4. Selling government bonds in open market operations Select the correct answer using the code given below:

The 'impossible trinity' in international economics suggests that a country cannot simultaneously maintain: 1. Fixed exchange rates 2. Independent monetary policy 3. Free capital mobility 4. Current account convertibility Which of the above combinations represent the impossible trinity?

Which of the following best describes India's approach to rupee volatility management?

Consider the following about forex market intervention: 1. Unsterilized intervention affects both exchange rate and domestic money supply 2. Forward market intervention can influence future exchange rates without immediate cash impact 3. Moral suasion involves direct regulatory restrictions on forex transactions 4. Sterilized intervention is preferred to maintain monetary policy independence Which of the statements given above are correct?