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?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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