Question

It is said that, in order to control inflation, foreign inflow needs to be sterilized. Sterilization here refers to

A Ensuring that counterfeit currency does not enter circulation Correct Answer Incorrect Answer
B Ensuring that black money is accounted for Correct Answer Incorrect Answer
C Withdrawing equivalent local currency to maintain a desirable rate of exchange Correct Answer Incorrect Answer
D Compliance with import-export regulations Correct Answer Incorrect Answer

Solution

Sterilization in the context of monetary policy refers to the activity of the RBI of taking away the excess money supply created due to its foreign exchange market intervention. Hence, C is the right answer.

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