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    Question

    The exchange rate between the Indian rupee (INR) and the US dollar (USD) has been fluctuating significantly due to global economic uncertainties and changes in investor sentiment. The Reserve Bank of India (RBI) is closely monitoring the situation and may intervene in the foreign exchange market to stabilize the rupee. Which of the following is NOT a tool that the RBI can use to intervene in the foreign exchange market?

    A Buying or selling US dollars in the market. Correct Answer Incorrect Answer
    B Changing the repo rate. Correct Answer Incorrect Answer
    C Imposing capital controls on foreign exchange transactions. Correct Answer Incorrect Answer
    D Increasing taxes on imported goods. Correct Answer Incorrect Answer
    E All of the above are tools that the RBI can use. Correct Answer Incorrect Answer

    Solution

    Increasing taxes on imported goods is a fiscal policy measure, not a tool for direct intervention in the foreign exchange market. The RBI primarily uses monetary policy tools and direct market interventions to manage the exchange rate.

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