Consider the following statements :
Statement I : A very strong US Dollar squeezes global credit.
Statement II : Many countries and companies outside America borrow in Dollars.
Which of the following is correct in respect of the above statements ?
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EPFO EO AO 2023
Both statement I and statement II are correct and statement II is the correct explanation for statement I
Correct AnswerBoth statement I and statement II are correct and statement II is not the correct explanation for statement I
Incorrect AnswerStatement I is correct but statement II is incorrect
Incorrect AnswerStatement I is incorrect but statement II is correct
Incorrect AnswerExplanation:
- Statement I: A strong US Dollar can indeed squeeze global credit. When the Dollar strengthens, it increases the cost of debt repayment for countries and companies that have borrowed in Dollars, effectively squeezing financial conditions.
- Statement II: This statement is correct. Many countries and companies outside America borrow in Dollars because it's the world's dominant currency for international trade and finance.
- Statement II correctly explains why a strong Dollar would squeeze global credit, as it raises the cost of servicing Dollar-denominated debt.
- Correct Answer: Both statement I and statement II are correct and statement II is the correct explanation for statement I
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By: Babita