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With reference to International Monetary Fund (IMF), consider the following statements:
1. The International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world.
2. Its member states have equal voting rights.
Which of the statements given above is/are correct?
- a)2 only
- b)1 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
With reference to International Monetary Fund (IMF), consider the foll...
- International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world. Its 189 member states (as on 12 April 2016) do not have equal voting rights.
- The vote of each country is weighed by how much money it has contributed to the IMF.
- More than 40% of the voting power in the IMF is in the hands of only seven countries (US, Japan, Germany, France, UK, Italy and Canada).The remaining 182 countries have very little say in how these international organisations take Decisions.
Most Upvoted Answer
With reference to International Monetary Fund (IMF), consider the foll...
Introduction:
The International Monetary Fund (IMF) is an international organization that aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It was established in 1944 and currently has 190 member countries. Let's analyze the given statements.
Statement 1: The International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world.
This statement is incorrect. The IMF is not primarily a moneylender, but rather a financial institution that provides financial assistance to member countries facing balance of payments problems. When a country experiences a shortage of foreign currency to meet its import obligations or service its external debt, it can request financial assistance from the IMF to stabilize its economy.
The IMF provides loans to member countries to support their policy adjustments and reforms. These loans are intended to help countries overcome temporary imbalances in their international payments, restore stability, and promote economic growth. The IMF's financial assistance is typically provided on the condition that the borrowing country implements certain economic and structural reforms to address the underlying problems.
Statement 2: Its member states have equal voting rights.
This statement is incorrect. While the IMF operates on the principle of one country, one vote, the voting power of member countries is not equal. Each member country is assigned a quota, which determines its voting power and access to IMF resources. Quotas are based on a country's economic size, including factors such as GDP, openness to trade, and variability of current account balances.
The voting power of member countries is determined by the distribution of quotas. The larger the quota, the greater the voting power. The five largest shareholders (United States, Japan, China, Germany, and France) hold the largest quotas and therefore have the greatest voting power. The United States has the largest quota and holds a de facto veto power over major decisions.
Conclusion:
In conclusion, both statements given in the question are incorrect. The IMF is not primarily a moneylender, but rather provides financial assistance to member countries facing balance of payments problems. Additionally, the voting power of member countries in the IMF is not equal, but is based on their quotas, with larger quotas leading to greater voting power.
The International Monetary Fund (IMF) is an international organization that aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It was established in 1944 and currently has 190 member countries. Let's analyze the given statements.
Statement 1: The International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world.
This statement is incorrect. The IMF is not primarily a moneylender, but rather a financial institution that provides financial assistance to member countries facing balance of payments problems. When a country experiences a shortage of foreign currency to meet its import obligations or service its external debt, it can request financial assistance from the IMF to stabilize its economy.
The IMF provides loans to member countries to support their policy adjustments and reforms. These loans are intended to help countries overcome temporary imbalances in their international payments, restore stability, and promote economic growth. The IMF's financial assistance is typically provided on the condition that the borrowing country implements certain economic and structural reforms to address the underlying problems.
Statement 2: Its member states have equal voting rights.
This statement is incorrect. While the IMF operates on the principle of one country, one vote, the voting power of member countries is not equal. Each member country is assigned a quota, which determines its voting power and access to IMF resources. Quotas are based on a country's economic size, including factors such as GDP, openness to trade, and variability of current account balances.
The voting power of member countries is determined by the distribution of quotas. The larger the quota, the greater the voting power. The five largest shareholders (United States, Japan, China, Germany, and France) hold the largest quotas and therefore have the greatest voting power. The United States has the largest quota and holds a de facto veto power over major decisions.
Conclusion:
In conclusion, both statements given in the question are incorrect. The IMF is not primarily a moneylender, but rather provides financial assistance to member countries facing balance of payments problems. Additionally, the voting power of member countries in the IMF is not equal, but is based on their quotas, with larger quotas leading to greater voting power.
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With reference to International Monetary Fund (IMF), consider the following statements:1. The International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world.2. Its member states have equal voting rights.Which of the statements given above is/are correct?a)2 onlyb)1 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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