Financial Awareness - Risk, Stability & Emerging Finance
The Balance of Payments crisis in 1991 was mainly due to:
The Balance of Payments crisis in 1991 was mainly due to:
medium Q6 of 15
Step-by-Step Solution
Step 1: Understand Balance of Payments crisis
The crisis was caused by a large fiscal deficit and depletion of foreign exchange reserves.Step 2: Analyze options
Excess reserves or trade surplus would not cause crisis; high agricultural exports are unrelated.Final Answer:
High fiscal deficit and low foreign exchange reserves → Option AQuick Check:
1991 crisis cause = Fiscal deficit and low forex reserves ✅
Quick Trick: Crisis = Low forex reserves + high fiscal deficit
Common Mistakes:
- Confusing surplus or high exports as crisis causes
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