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Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors?
- size of the US economy
- reach of its trade and financial networks
- depth and liquidity of US financial markets
- history of macroeconomic stability
- currency convertibility
How many of the above statements are correct?
- a)Only two
- b)Only three
- c)Only four
- d)All five
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Currently, the US dollar is said to enjoy an ‘Exorbitant Privile...
- Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions, among global currencies.
- The dollar’s position is supported by a range of factors, including the size of the US economy, the reach of its trade and financial networks, the depth and liquidity of US financial markets, and a history of macroeconomic stability and currency convertibility. Dollar dominance has also benefited from the lack of viable alternatives.
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Currently, the US dollar is said to enjoy an ‘Exorbitant Privile...
Advantageous position as the world's reserve currency. This means that many countries hold US dollars as part of their foreign exchange reserves and use it for international trade and transactions. The US dollar's status as the world's reserve currency provides several benefits to the United States:
1. Global demand: The widespread use of the US dollar in international trade and finance leads to a high demand for the currency. This demand helps support the value of the US dollar and makes it more stable compared to other currencies.
2. Lower borrowing costs: As the world's reserve currency, the US can borrow money in its own currency at lower interest rates. This allows the US government to fund its budget deficit and debt more affordably.
3. Reduced exchange rate risk: With the US dollar as the world's reserve currency, many countries peg their own currencies to the US dollar or use it as a reference point. This reduces exchange rate risk for countries and facilitates international trade and investment.
4. Dominance in global financial markets: The US dollar's reserve currency status gives the United States influence and control over global financial markets. It allows the US to set global monetary policy standards and have a say in international financial institutions.
However, there are also potential disadvantages associated with the US dollar's reserve currency status:
1. Vulnerability to economic shocks: The US dollar's value can be affected by global economic events, such as financial crises or changes in global investor sentiment. This can create volatility and uncertainty in the US economy.
2. Dependency on foreign demand: The US relies on foreign countries' demand for US dollars to sustain its reserve currency status. If this demand were to decline significantly, it could negatively impact the US economy.
3. Risk of inflation and debt: The ability to borrow at lower interest rates may lead to increased government debt, which can potentially result in inflation and a devaluation of the US dollar.
4. Loss of competitiveness: The strength of the US dollar as a reserve currency can make US exports more expensive and less competitive in global markets. This can negatively impact industries reliant on trade and exports.
Overall, while the US dollar's reserve currency status offers numerous advantages, it also comes with potential risks and challenges.
1. Global demand: The widespread use of the US dollar in international trade and finance leads to a high demand for the currency. This demand helps support the value of the US dollar and makes it more stable compared to other currencies.
2. Lower borrowing costs: As the world's reserve currency, the US can borrow money in its own currency at lower interest rates. This allows the US government to fund its budget deficit and debt more affordably.
3. Reduced exchange rate risk: With the US dollar as the world's reserve currency, many countries peg their own currencies to the US dollar or use it as a reference point. This reduces exchange rate risk for countries and facilitates international trade and investment.
4. Dominance in global financial markets: The US dollar's reserve currency status gives the United States influence and control over global financial markets. It allows the US to set global monetary policy standards and have a say in international financial institutions.
However, there are also potential disadvantages associated with the US dollar's reserve currency status:
1. Vulnerability to economic shocks: The US dollar's value can be affected by global economic events, such as financial crises or changes in global investor sentiment. This can create volatility and uncertainty in the US economy.
2. Dependency on foreign demand: The US relies on foreign countries' demand for US dollars to sustain its reserve currency status. If this demand were to decline significantly, it could negatively impact the US economy.
3. Risk of inflation and debt: The ability to borrow at lower interest rates may lead to increased government debt, which can potentially result in inflation and a devaluation of the US dollar.
4. Loss of competitiveness: The strength of the US dollar as a reserve currency can make US exports more expensive and less competitive in global markets. This can negatively impact industries reliant on trade and exports.
Overall, while the US dollar's reserve currency status offers numerous advantages, it also comes with potential risks and challenges.
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Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. 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 Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. Can you explain this answer?.
Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. 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 Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. Can you explain this answer?.
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ample number of questions to practice Currently, the US dollar is said to enjoy an ‘Exorbitant Privilege’, which refers to the innumerable benefits that accrue to the US on account of all other countries of the world using the US dollar as their currency in most of their international transactions. The dollar’s position is currently supported by which of the following factors? size of the US economy reach of its trade and financial networks depth and liquidity of US financial markets history of macroeconomic stability currency convertibilityHow many of the above statements are correct?a)Only twob)Only threec)Only fourd)All fiveCorrect answer is option 'D'. Can you explain this answer? tests, examples and also practice UPSC tests.
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