Question

From the following, identify the correct reasons that may affect the supply of foreign exchange in an economy: 
I. Purchase of land in England by an Indian 
II. Foreign tourists visiting Taj Mahal 
III. Donation of 500 million dollars from Microsoft 
IV. Indian students going to Australia for studies

• A. I and II
• B. II and IV
• C. II and III
• D. I and IV

Hint:

Foreign inflows, such as tourist spending and donations, directly increase the supply of foreign exchange in the economy.

Answer 1

The Correct Option is C

- Reason II (Foreign tourists visiting Taj Mahal) will bring foreign exchange into India as they spend money during their visit. 
- Reason III (Donation of 500 million dollars from Microsoft) will also increase foreign exchange supply as it is an inflow of funds into the economy. 
Conclusion: The correct answer is (C), as foreign tourists and donations will directly impact the supply of foreign exchange.