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Consider the following statements regarding Special Drawing Right (SDR).
1. The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.
2. The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.
3. It can be held and used by member countries, private entities or individuals.
Which of the above statements is/are incorrect?
  • a)
    1 and 2 only
  • b)
    2 only
  • c)
    2 and 3 only
  • d)
    1 and 3 only
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding Special Drawing Right (SDR...
  • The Special Drawing Right (SDR) is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries.
  • The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi. It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members. The value of the SDR is not directly determined by supply and demand in the market, but is set daily by the IMF on the basis of market exchange rates between the currencies included in the SDR basket.
  • It can be held and used by member countries, the IMF, and certain designated official entities called "prescribed holders"—but it cannot be held, for example, by private entities or individuals. Its status as a reserve asset derives from the commitments of members to hold, accept, and honor obligations denominated in SDR. The SDR also serves as the unit of account of the IMF and some other international organizations.
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Consider the following statements regarding Special Drawing Right (SDR...
Special Drawing Right (SDR) is an international reserve asset generated by the International Monetary Fund (IMF) to supplement the existing official reserves of member countries. It was created in 1969 and is based on the basket of currencies, including the US dollar, euro, yen, pound sterling, and the Chinese renminbi.

Incorrect Statements:

2. The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.
3. It can be held and used by member countries, private entities or individuals.

Explanation:

2. The value of SDR is determined by the IMF's basket of currencies, and it is reviewed and adjusted every five years based on the relative importance of currencies in international trade and finance. The IMF also determines the interest rate on SDR holdings.

3. SDR is only allocated to member countries, and it cannot be held or used by private entities or individuals. However, member countries can use SDR to settle international payments or to obtain currencies of other member countries.

Correct Statements:

1. The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.

Explanation:

1. SDR is a financial instrument created by the IMF to supplement the official reserves of member countries. It is not a currency but a claim to currencies held by IMF member countries. SDR holdings earn interest and can be used by member countries to settle international payments or to obtain currencies of other member countries.
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Consider the following statements regarding Special Drawing Right (SDR).1.The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.2.The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.3.It can be held and used by member countries, private entities or individuals.Which of the above statements is/are incorrect?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'C'. Can you explain this answer?
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Consider the following statements regarding Special Drawing Right (SDR).1.The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.2.The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.3.It can be held and used by member countries, private entities or individuals.Which of the above statements is/are incorrect?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'C'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Special Drawing Right (SDR).1.The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.2.The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.3.It can be held and used by member countries, private entities or individuals.Which of the above statements is/are incorrect?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Special Drawing Right (SDR).1.The Special Drawing Right (SDR) is an international reserve asset generated by the IMF that bears interest.2.The value of the SDR is not set by IMF, rather it is directly determined by supply and demand in the market.3.It can be held and used by member countries, private entities or individuals.Which of the above statements is/are incorrect?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'C'. Can you explain this answer?.
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