In the context of India, which of the
following factors is/are contributor/
contributors to reducing the risk of a
currency crisis?
1. The foreign currency earnings of
India’s IT sector
2. Increasing the government
expenditure
3. Remittances from Indians abroad
Select the correct answer using the code
given below.

A currency crisis is brought on by a decline in the value of a country’s currency. This decline in value negatively affects an economy by creating instabilities in exchange rates, meaning that one unit of a certain currency no longer buys as much as it used to in another currency.

Foreign currency earnings and Remittances contribute to the strengthening of the rupee. Hence statement 1 and 3 is correct.

Increasing government Expenditure will have no effect on the the value of currency. Hence statement 2 is not correct.