UPSC Prelims 2015— Question 94

Correct answer: Option C. International liquidity refers to the availability of internationally acceptable means of payment and reserves that countries can use to settle external obligations. Historically, the issue has been closely connected with shortages of reserve currencies such as the U.S. dollar and other hard currencies. It is therefore not simply a shortage of goods, silver or exportable surplus. Option-wise analysis: Option A: “goods and services” is incorrect. It does not match the specific fact, definition, institutional role, geographical association, or constitutional/economic principle required here. The key distinction is the one identified in the core explanation, so this option can be eliminated. Option B: “gold and silver” is incorrect. It does not match the specific fact, definition, institutional role, geographical association, or constitutional/economic principle required here. The key distinction is the one identified in the core explanation, so this option can be eliminated. Option C: “dollars and other hard currencies” is correct. It directly matches the factual or conceptual requirement tested by the question and is supported by the principle explained above. Option D: “exportable surplus” is incorrect. It does not match the specific fact, definition, institutional role, geographical association, or constitutional/economic principle required here. The key distinction is the one identified in the core explanation, so this option can be eliminated. Prelims takeaway: Focus on the precise institutional role, constitutional provision, geographical association, or technical definition being tested. UPSC questions often place a broadly familiar fact beside a narrowly incorrect qualifier; identifying that qualifier is essential for elimination.