Question

Observe the image and identify the function of Central Bank associated with it.

Options

• The central bank advises the Government to encourage exports and to restrict imports in such a way that the balance of payments may be favourable to the country.

• The State Bank of India carries out these settlements where the Reserve Bank of India has no office.

• The Reserve Bank of India creates special financial institutions for promoting economic development in different sectors of the economy - Development functions.

• The central bank makes all possible efforts to maintain a stable exchange rate -Maintaining the Exchange Rate.

Answer 1

The central bank makes all possible efforts to maintain a stable exchange rate -Maintaining the Exchange Rate.

Explanation:

The image shows different currencies and exchange flows; this matches the central bank’s role of maintaining a stable exchange rate by intervening in foreign-exchange markets (buying/selling currencies and fixing rates to prevent wide fluctuations).