Correct answer: (b) 1 and 3 only
Explanation
- A
1 only
(a) 1 only. Remittances (statement 3) also supply foreign exchange and cut currency-crisis risk. Dropping 3 is not the key.
- B
1 and 3 only
(b) 1 and 3 only. IT export earnings and inward remittances raise the supply of foreign currency and support the rupee. Raising government expenditure (statement 2) does not, by itself, reduce currency-crisis risk and may worsen the current account. That pair is the official key.
- C
2 only
(c) 2 only. Higher government spending is not a classic buffer against a currency crisis. This option is not the key.
- D
1, 2 and 3
(d) 1, 2 and 3. Statement 2 does not belong, so the all-correct code fails.
Summary. Official key is (b). Invisible receipts from IT services and from workers’ remittances are durable sources of dollars and reduce run risk on the rupee. Fiscal expansion is not a currency-crisis hedge. Honour (b).
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