The problem of international liquidity is related to the non-availabil

The problem of international liquidity is related to the non-availability of

goods and services

gold and silver

dollars and other hard currencies

exportable surplus

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This question was previously asked in

UPSC IAS – 2015

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The problem of international liquidity is related to the non-availability of dollars and other hard currencies.

International liquidity refers to the availability of financial assets that can be readily used to settle international transactions, primarily reserves of convertible foreign currencies (hard currencies), gold, and drawing rights with international institutions like the IMF (SDRs).

Hard currencies, such as the US Dollar, Euro, Yen, and Pound Sterling, are widely accepted in international trade and finance due to their stability and convertibility. A ‘problem of international liquidity’ arises when there is a shortage of these internationally accepted means of payment relative to the volume of international trade and financial flows, making it difficult for countries to finance balance of payments deficits.

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