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Consider the following statement in regard to reserve currency :
(1) Reserve currency acts at the international pricing currency in the global market for commodities like oil and gold.
(2) The country whose local currency is accepted as reserve currency gets an added advantage in terms of lower commodity rates in the international market.
Which of the statements given above is / are correct
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- I only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Correct Option: C
A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves, and that is commonly used in international transactions for commodities like oil and gold. Persons who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than persons in other nations because they need not exchange their currency to do so.
