Question

Q. Which of the following statements is/are correct about the Liberalised Exchange Rate Management System?

Select the correct code from the options given below:

• A. 1 and 2 only
• B. 2 and 3 only
• C. 1 and 3 only
• D. None of the above

Answer 1

The correct option is C 1 and 3 only

Explanation:

• Statement 1 is correct. The Liberalised Exchange Rate Management System allowed partial convertibility of money.
• Statement 2 is incorrect. LERMS adopted a dual exchange rate under which 40 per cent of the foreign exchange earnings were to be surrendered at the official exchange rate (Fixed Exchange Rate) while the remaining 60 per cent were to be converted at a market-determined rate (Flexible Exchange Rate).
• Statement 3 is correct. The floating rate is often market-determined in parallel to the official exchange rate and hence has higher scope of exchange results.