Economic Awareness - Sectors of Indian Economy
Which of the following statements about the currency board system is INCORRECT?
Which of the following statements about the currency board system is INCORRECT?
hard Q9 of 15
Step-by-Step Solution
Step 1: Understand currency board system features
Currency board requires full foreign reserve backing, automatic convertibility, and is a strict fixed regime with limited central bank discretion.Step 2: Analyze each statement
The central bank has full discretion over monetary policy is incorrect because the central bank has very limited discretion. The domestic currency is fully backed by foreign currency reserves is correct. Currency convertibility is automatic and guaranteed is correct. It is a strict form of fixed exchange rate regime is correct.Final Answer:
The central bank has full discretion over monetary policy. → Option AQuick Check:
Currency board central bank discretion = limited, not full ✅
Quick Trick: Currency board limits central bank discretion.
Common Mistakes:
MISTAKES- Assuming currency board allows full monetary policy freedom.
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