The problem of international liquidity is related to the non-availability of

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UPSC Civil Services Exam (Prelims) GS Paper-I (Held On: 23 Aug, 2015)
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  1. goods and services
  2. gold and silver
  3. dollars and other hard currencies
  4. exportable surplus

Answer (Detailed Solution Below)

Option 3 : dollars and other hard currencies
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The correct answer is dollars and other hard currencies.

  • The concept of international liquidity is associated with international payments that arise out of international trade in goods and services.
  • International liquidity consists of all the resources that are available to the monetary authorities of countries for the purpose of meeting balance of payments deficits.
  • Such liquidity ranges from assets readily available to resources that become available only after extensive negotiation.
  • The primary medium of international liquidity are gold and those foreign currencies which are universally acceptable in the settlement of international transactions.
  • The problem of international liquidity exists essentially for developing countries.
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