QUESTION-WISE · PRELIMS 2011 · Q2

Indian Economy · Prelims 2011 Q2

Consider the following actions which the Government can take: 1. Devaluing the domestic currency. 2. Reduction in the export subsidy. Which of the above action/actions can help in…

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External Sector Exchange Rates Answer A

The question

Stem and options.

Consider the following actions which the Government can take:

1. Devaluing the domestic currency.
2. Reduction in the export subsidy.

Which of the above action/actions can help in reducing the current account deficit?

1 only

2 only

1 and 2 only

None of the above

Source: UPSC Civil Services Preliminary Examination 2011. Syllabus tags and explanation are GyanGram editorial joins for learning—not official UPSC metadata.

Answer

Correct option A

• Correct Answer: A
• Devaluation makes exports cheaper and imports costlier, narrowing the current account deficit.
• Reducing export subsidies makes domestic goods less competitive, worsening the deficit.

Syllabus path

Where this sits in Learn.

Subject

Indian Economy

ECO

Unit

External Sector

ECO-U10

Chapter

Exchange Rates

ECO-U10-C04

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