Question

Foreign Exchange Reserves increases.

• A. By Import Trade
• B. By Export Trade
• C. By National Level Trade
• D. By Domestic Trade

Hint:

Foreign exchange reserves grow primarily through exports, as they bring in foreign currency to the country.

Answer 1

The Correct Option is B

Step 1: Understanding foreign exchange reserves.
Foreign exchange reserves increase primarily through export trade, as the country earns foreign currency from the goods and services it exports.
Step 2: Analyzing the options.

• (A) By Import Trade: Incorrect. Import trade results in an outflow of domestic currency, which reduces foreign exchange reserves.
• (B) By Export Trade: Correct. Export trade brings in foreign currency, thus increasing foreign exchange reserves.
• (C) By National Level Trade: Incorrect. While national level trade involves both imports and exports, it is the export side that increases reserves.
• (D) By Domestic Trade: Incorrect. Domestic trade does not involve foreign currency and does not impact foreign exchange reserves.

Step 3: Conclusion.
Foreign exchange reserves increase through export trade, making option (B) the correct answer. Final Answer:} By Export Trade.