Question

The central bank maintains foreign exchange reserves in order to promote

• A. Rural trade
• B. International trade
• C. Urban trade
• D. National trade

Answer 1

The correct option is B

International trade

The central bank acts as the custodian of all foreign exchange reserves such as the US dollar, British pound, etc. It helps to overcome the balance of payments difficulties and to maintain stability in the exchange rate. Thus, it maintains foreign exchange reserves in order to promote international trade.