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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?
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...
Statement 1: The International Monetary Fund (IMF) is one of the biggest moneylenders for any country in the world.
The first statement is incorrect. The International Monetary Fund (IMF) is not a moneylender in the traditional sense. It does not provide loans to countries for general purposes like a commercial bank. Instead, it provides financial assistance to member countries facing balance of payments problems, which are typically caused by an inability to meet their international financial obligations.
Statement 2: Its member states have equal voting rights.
The second statement is also incorrect. While the IMF promotes the principle of equal voting rights among its member states, the voting power in the organization is not distributed equally. Each member country is assigned a quota, which determines its voting power in the IMF. Quotas are based on a country's economic size and its role in the global economy. Larger economies have higher quotas and thus more voting power.
The quota system is designed to ensure that the IMF's governance structure reflects the relative economic weight of its member countries. The five largest shareholders, namely the United States, Japan, Germany, France, and the United Kingdom, together hold around 38% of the total voting power. Therefore, these countries have a significant influence on the decision-making process of the IMF.
The remaining member countries have voting power based on their quotas, which are determined through a formula that takes into account a country's GDP, openness to international trade, and economic variability. However, it is important to note that decisions in the IMF require a majority vote, and certain major policy decisions require a supermajority of 85% of the total voting power.
In conclusion, both statements are incorrect. The IMF is not a moneylender, and its member states do not have equal voting rights. The organization provides financial assistance to countries facing balance of payments problems, and voting power is determined by quotas, which reflect the economic size and role of each member country.
The first statement is incorrect. The International Monetary Fund (IMF) is not a moneylender in the traditional sense. It does not provide loans to countries for general purposes like a commercial bank. Instead, it provides financial assistance to member countries facing balance of payments problems, which are typically caused by an inability to meet their international financial obligations.
Statement 2: Its member states have equal voting rights.
The second statement is also incorrect. While the IMF promotes the principle of equal voting rights among its member states, the voting power in the organization is not distributed equally. Each member country is assigned a quota, which determines its voting power in the IMF. Quotas are based on a country's economic size and its role in the global economy. Larger economies have higher quotas and thus more voting power.
The quota system is designed to ensure that the IMF's governance structure reflects the relative economic weight of its member countries. The five largest shareholders, namely the United States, Japan, Germany, France, and the United Kingdom, together hold around 38% of the total voting power. Therefore, these countries have a significant influence on the decision-making process of the IMF.
The remaining member countries have voting power based on their quotas, which are determined through a formula that takes into account a country's GDP, openness to international trade, and economic variability. However, it is important to note that decisions in the IMF require a majority vote, and certain major policy decisions require a supermajority of 85% of the total voting power.
In conclusion, both statements are incorrect. The IMF is not a moneylender, and its member states do not have equal voting rights. The organization provides financial assistance to countries facing balance of payments problems, and voting power is determined by quotas, which reflect the economic size and role of each member country.
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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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