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Special Drawing Rights (SDR) can be used to
- Supplement IMF member countries’ official reserves.
- Settle Balance of Payment transactions
- Fund infrastructure projects
Select the correct answer code:
- a)1, 3
- b)1, 2
- c)2, 3
- d)1, 2, 3
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Special Drawing Rights (SDR) can be used to Supplement IMF member coun...
Official Reserves:
- Special Drawing Rights (SDR) can be used to supplement IMF member countries' official reserves. SDRs are allocated to member countries to supplement their official reserves, providing liquidity and stability to the global economy.
Balance of Payment Transactions:
- SDRs can also be used to settle balance of payment transactions between member countries. This helps facilitate international trade and finance by providing a neutral, international asset that can be used in transactions between countries.
Not for Infrastructure Projects:
- SDRs are not typically used to fund infrastructure projects. They are primarily used as a reserve asset by central banks and governments to support their own currencies and international transactions. Funding infrastructure projects is usually done through other means such as government spending, loans, or public-private partnerships.
Therefore, the correct answer is option 'B' (1, 2), as SDRs can be used to supplement official reserves and settle balance of payment transactions, but not typically for funding infrastructure projects.
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Special Drawing Rights (SDR) can be used to Supplement IMF member coun...
- The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies. It cannot be used to fund infrastructure projects as it is not a currency. Same goes for settling domestic financial bills of the government.
- SDR allocations can play a role in providing liquidity and supplementing member countries’ official reserves.
- IMF member countries can borrow SDRs from its reserves at favourable interest rates, mostly to adjust their balance of payments to favourable positions.
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Special Drawing Rights (SDR) can be used to Supplement IMF member countries’ official reserves. Settle Balance of Payment transactions Fund infrastructure projectsSelect the correct answer code:a)1, 3b)1, 2c)2, 3d)1, 2, 3Correct answer is option 'B'. Can you explain this answer?
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